FLOTSAM & JETSAM: War and debt

Wednesday, July 06, 2011

War and debt

Sam Smith

The fantasy parading as serious negotiations over the nation’s debt collapses on the recognition of one fact: our absurdly expensive wars are not even on the table.

A Brown University study finds that the figure just for our post 9/11 misbegotten escapades approaches $4 trillion. That’s about 25% of our whole national debt accrued in just one decade of badly distorted policies. Add in the Bush tax cuts and you have an explanation for one-third of our total fiscal deficiency.

Given the hawkish inclinations of our media, with even MSNBC owned by GE, this is not something you’re about to hear much about, so instead it’ll have to be paid for out of things like food stamps and Social Security.

Further, enabling the denial is a myth that wars are good for the economy. This is only true, however, if you engage in one or two factor analysis.

David Henderson looked at World War II from an economic – not moral - perspective and made some important points:

[][] Imagine that somehow the United States had avoided entering World War II. . . Millions of cars would have been produced; people would have been able to travel much more widely; and there would have been no rationing of meat, tires, nylons, eggs, butter, and sugar. In short, by the standard measures of prosperity, Americans would have been much more prosperous. . .

Much of the capital and labor would have been producing cars and trucks for the domestic economy. In fact, the assembly lines in Detroit, which had churned out 3.6 million cars in 1941, were retooled to produce the vehicles of war. By 1942, auto production was down to under 1 million. For the years 1943 to 1945, auto production was so low that Wikipedia does not even report it. During the period from late 1942 to the 1945, in other words, almost the whole of U.S. participation in the war, production of civilian cars was essentially shut down.. .

Consider fuel. Because the government wanted to buy fuel at an artificially low price, it imposed price controls on gasoline and put itself first in line. Then it issued ration cards to Americans, dramatically reducing the amount that normal Americans could buy at the controlled prices. . . Even railroad seats were rationed, writes Brinkley, with priority given to military personnel. [][]

There’s another cost that hardly ever gets discussed: war typically has little or no spin off benefit. A good economy creates new economies. For example, if you build a rail line to a town that hasn’t had one, you not only have the benefit of the public works project but all the good that line does for the town’s economy and the economic opportunities it opens up for its residents.

But if the same amount of money is spent in Afghanistan on roads, tanks and Humvees the spin off benefit will be essentially non-existent. War creates economies with a greatly reduced lifespan and greatly reduced benefits.

Another way to look at this is to consider what happens after wars are over.

Roughly two thirds of all deficit eduction in the past century occurred following World War I and World War II.
Jermie D. Cullip described what happened after World War II:

[][] From 1950 to 1959, the total number of females employed increased by 18%. The standard of living during the fifties also steadily rose. Most people expected to own a car and a house, and believed that life for their children would be even better. . . The number of college students doubled. Getting a college education was no longer for the rich or elite
Over the decade the housing supply increased 27 percent . . . Growth in the economy also led to increasing popularity of other financial intermediaries. . .

Over the decade, GNP per capita almost doubled and the public welfare reacted accordingly as the cost of living index rose by just 1 percent and unemployment dropped to 4.1 percent. [][]

Much as World War Ii may have aided Roosevelt close out the Depression, it was the end of the war that created the boom.

The other one third of the past century’s deficit reduction occurred during the Clinton administration, but as Dean Baker perceptively noted in 2003:

“The Clinton boom was built on three unsustainable bubbles. One of them, the stock bubble, has already burst. The other two bubbles—the dollar bubble and the housing bubble—are still with us.”

In part, and in no small part, we are paying for Clinton’s boom today.

There are lots of moral grounds on which to oppose war, especially those as mindless and futile as those Iraq and Afghanistan. But we shouldn’t lose sight of another fact: wars are a gigantic waste of money, they damage the economy, and they undermine its growth. The failure of our leaders of both parties to give this more than passing notice is a sign of total incompetence or of total indenture to the military machine. In either case, they are wrecking the country about which they pretentiously claim such patriotism.