Sunday, June 15, 2014

War and Economic Growth

Guy de Lusignan: Give me a war.
Reynald de Chatillon: That is what I do.
--Kingdom of Heaven

Few venues publish more absurd pieces than the NYT. This one, however, is among the most absurd. The proposition is that lack of war is hurting global growth.

The author, an economist from George Mason University (who by his affiliation should know better), suggests that "greater peacefulness of the world may make the attainment of higher rates of economic growth less likely." Further, "the very possibility of war focuses the attention of governments on getting some basic decisions right--whether investing in science or simply liberalizing the economy. Such focus ends up improving a nation's longer run prospects."

This is a laughable proposition and merely another variation of the Bastiat's Broken Window Fallacy.

War, or any destructive violence for that matter, destroys productive assets. Efforts to rebuild them merely get the capital stock back towards even. All the while, society is hurt because those efforts could have gone toward advancing prosperity rather than rebuilding it.

Taking this 'logic' to completion suggests bulldozing houses and killing people in the name of progress.

The author's argument does differ a bit. He posits that war allows government to force advancements that it cannot do in peacetime. But the author does not explain how government force during war, or anytime for that matter, 'liberalizes' economies and is superior to voluntary interactions among people always interested in improving their positions in life. He never explains how advancement occurs in the context of broken assets, lost lives, and all of the energy diverted to unproductive killing and conquest rather than to peaceful cooperation.

In the context of war, a more plausible argument for today's slowing growth is that savings and debt used to finance wars or capacity for war in the past have resulted in capital consumption, leaving us less capable of investing in projects that improve productivity in the future.

Sadly, history suggests policymakers derive just the sort of foolish lesson suggested by this article: that war can be an effective way to bolster an economy--assuming that you win the war, of course.

1 comment:

dgeorge12358 said...

War prosperity is like the prosperity that an earthquake or a plague brings. The earthquake means good business for construction workers, and cholera improves the business of physicians, pharmacists, and undertakers; but no one has for that reason yet sought to celebrate earthquakes and cholera as stimulators of the productive forces in the general interest.
~Ludwig von Mises