Another piece of info for you Bush bashers..

[Mort Corey]

War being good for the economy is like hitting yourself in the head with a hammer 'cause it feels so good when you stop. Sorry, war merely enlarges and empowers the state. But hey, if I'm wrong then things should be hunky-doory if these idiots start a shooting war with Russia and/or Iran.

Mort

 

[jamie2112]

War being good for the economy is like hitting yourself in the head with a hammer 'cause it feels so good when you stop. Sorry, war merely enlarges and empowers the state. But hey, if I'm wrong then things should be hunky-doory if these idiots start a shooting war with Russia and/or Iran.

Mort

Touche.........

 

[Tomorrow]

War being good for the economy is like hitting yourself in the head with a hammer 'cause it feels so good when you stop. Sorry, war merely enlarges and empowers the state. But hey, if I'm wrong then things should be hunky-doory if these idiots start a shooting war with Russia and/or Iran.

Mort

One would be an abject fool to say that war is "good" for any society for any reason. But it's a truth of history that war does improve economies. That's what we were discussing, not the righteousness or foolishness of war. My post was in response to Schmoe's statement that this war is causing our failing economy...which it is not. Nothing more. If you were reading more into it, you were not paying attention.

 

[Davemcc]

But it's a truth of history that war does improve economies.

I'm afraid to say that this is not true. The world wars devastated the economies of England, France, Germany, Italy, Russia and Japan. America is a special case because for the most part, America supplied arms to England, France and Russia on a for profit basis years before America's entry to the wars. Damage to the European economies was deep and long standing and they did not recover significantly in the interwar period and only recovered post-war in a large part due to the Marshall Plan.

This war is different in the sense that there is no paying customer for America's arms production except the US taxpayer. The net effect is that taxes are extracted from the taxpayer and blown up in Iraq rather than producing some domestic commercial value. In absolute terms, the American taxpayer is poorer for having paid for munitions spent on Iraq and the American economy is poorer as a result.No country is richer for having been engaged in a war. But in America's case, it was richer for having supplied the means of war to others.

The other reason it may appear that war benefited the American economy has to do with the fact that America was involved in a depression immediately prior to the war, largely due to a trade war with the European nations and the Smoot-Hawley tariff of 1930. Once the war was underway, American food and finished goods exports to Europe grew and became profitable once again, ending America's depression economy before it ever entered the war.

 

[Rickster71]

Seemed like a good Idea at the time.

Saw this in an economics article-
By ridding Iraq of Saddam, the hope was a democratic pro-business leader could come in and improve the economy of Iraq, in the long run. The economy of the United States could improve in the long run due to the war for a couple of reasons:

An increased supply of oil:
Depending on who you ask, the war either has everything to do with Iraq's vast oil supplies, or absolutely nothing to do with it. All sides should agree that if a regime with better American relations were set up in Iraq, the supply of oil to the United States would increase. This will drive down the price of oil, as well as driving down the costs of companies that use oil as a factor of production which will certainly help economic growth.

Stability and Economic Growth in the Middle East:
If peace can somehow be established in the Middle East, the U.S. government might not have to spend as much money on the military as they do now. If the economies of the countries in the middle east become more stable and experience growth, this will give them more opportunities to trade with the United States, improving both the economies of those countries and the U.S.

 

[Tomorrow]

I'm afraid to say that this is not true. The world wars devastated the economies of England, France, Germany, Italy, Russia and Japan. America is a special case because for the most part, America supplied arms to England, France and Russia on a for profit basis years before America's entry to the wars. Damage to the European economies was deep and long standing and they did not recover significantly in the interwar period and only recovered post-war in a large part due to the Marshall Plan.

This war is different in the sense that there is no paying customer for America's arms production except the US taxpayer. The net effect is that taxes are extracted from the taxpayer and blown up in Iraq rather than producing some domestic commercial value. In absolute terms, the American taxpayer is poorer for having paid for munitions spent on Iraq and the American economy is poorer as a result.No country is richer for having been engaged in a war. But in America's case, it was richer for having supplied the means of war to others.

The other reason it may appear that war benefited the American economy has to do with the fact that America was involved in a depression immediately prior to the war, largely due to a trade war with the European nations and the Smoot-Hawley tariff of 1930. Once the war was underway, American food and finished goods exports to Europe grew and became profitable once again, ending America's depression economy before it ever entered the war.

Well said, Dave. But I think there are some factors you have forgotten. Please remember that we are talking solely about the American economy, here. That was Schmoe's (Portnoy's?! ) complaint and the issue of my response.

You have addressed one small segment of the history of American warfare. And we were not discussing general economies of other countries affected by those wars. Warfare of course takes a huge toll upon the country where it's waged. Your point about Europe is of course accurate, but the U.S. benefitted as a result of the two WW's much more than from arms sales to Russia and Europe. (More later.) But you neglected to mention the other major wars of the century with U.S. involvement. We realized no major profitable arms sales to anyone when we were fighting Korea, Viet Nam, Desert Storm, or even Bosnia. (We supplied free equipment to the fighters on our side in those wars...but no notable sales.) Yet the U.S. experienced large bumps in economy as a result of these wars, and the WW's. By all current economic measures, GNP, worker productivity, currency value, employment rates, balance of trade (!!), etc....we benefitted from all of these military activities.

With regards to the specific period you mentioned, recall that most of the war debt was forgiven by the U.S. to those involved in WWII. We didn't need to make money off the war. We made money the old fashioned way. We supplied the materials and technololgy for the post-war rebuilds. America is the Great Contractor. That is what will eventually happen in Iraq, too. We blow 'em up, and then charge 'em for rebuilding. Nice, eh? It's only better when someone else blows them up first. Then we're not seen as the ugly American imperialist aggressors.

Lastly, I mentioned also that the psychology and productivity generated by those 20th century wars also aided our economy. New technology always spurs economic growth. War spurs new technologies. High employment rates make for an expanded economy. Wars spur high employment rates. Endings of wars, particularly if we've been seen to "win", provokes a sense of national pride and a psychology that we can do whatever is needed. As you know, economic growth or decline is based more on 'perception' of the economy than anything else. When we invest or buy, the economy is strong. When we don't, we have inflation and hoarding. Perception is everything. Cultural pride and a positive civic psychological state spurs investment.

I'm certain that there are other reasons/causes for this economic head scratcher. These are just my .02. But the facts are that if you look at the U.S. economic indicators after all these wars, you'll find accelerated growth. And again, all I said was that war historically improves the U.S. economy and is not the reason for our current poor economic state of affairs.

 

[Mort Corey]

One would be an abject fool to say that war is "good" for any society for any reason. But it's a truth of history that war does improve economies. That's what we were discussing, not the righteousness or foolishness of war. My post was in response to Schmoe's statement that this war is causing our failing economy...which it is not. Nothing more. If you were reading more into it, you were not paying attention.

War is a waste of resources...I was paying attention. If you don't believe that sucking a half trillion (minimum) dollars a year out of productive purposes of the economy is partially to blame for a faultering economy then I suspect you are employed by some government entity. The present conflict is being paid for with borrowing and counterfeiting which makes us poorer. At the conclusion of the present conflict, the economy will likely turn positive but not because of it, but rather its absense will allow more productive purposes to be persued.

Then again, I have been wrong before....ask my wife

Mort

 

[annunaki]

Seemed like a good Idea at the time.

Saw this in an economics article-
By ridding Iraq of Saddam, the hope was a democratic pro-business leader could come in and improve the economy of Iraq, in the long run. The economy of the United States could improve in the long run due to the war for a couple of reasons:

An increased supply of oil:
Depending on who you ask, the war either has everything to do with Iraq's vast oil supplies, or absolutely nothing to do with it. All sides should agree that if a regime with better American relations were set up in Iraq, the supply of oil to the United States would increase. This will drive down the price of oil, as well as driving down the costs of companies that use oil as a factor of production which will certainly help economic growth.

Stability and Economic Growth in the Middle East:
If peace can somehow be established in the Middle East, the U.S. government might not have to spend as much money on the military as they do now. If the economies of the countries in the middle east become more stable and experience growth, this will give them more opportunities to trade with the United States, improving both the economies of those countries and the U.S.

One problem there is keeping Iraq out of Opec. If they are a member, they can command a higher price for their oil. Ultimately Opec would control their supply, not us.

 

[Tomorrow]

War is a waste of resources...I was paying attention. If you don't believe that sucking a half trillion (minimum) dollars a year out of productive purposes of the economy is partially to blame for a faultering economy then I suspect you are employed by some government entity. The present conflict is being paid for with borrowing and counterfeiting which makes us poorer. At the conclusion of the present conflict, the economy will likely turn positive but not because of it, but rather its absense will allow more productive purposes to be persued.

Then again, I have been wrong before....ask my wife

Mort

Yes Mort, my wife would say the same.

You might want to remember that the "sucking of half-trillion a year out of productive purposes" is going broadly to U.S. military equipment, advanced U.S. technology, and to U.S. employees and U.S. companies. On what "more productive purposes" would you like to spend that money? Schools? Like to know how much money goes to schools? In 2004, there were approximately 70 million students in the U.S. The average government expenditure per student in 2004 was $8,287. You do the math. Anyway, when you become king, you can let us know what you believe to be productive and what you believe to be non-productive uses of our fake money. In case you hadn't noticed, the U.S. has been printing it's own "counterfeit" money for decades. That's what is called the National Debt. Can you name the last balanced budget? Where the funny-money gets spent is a matter of priorities of our leaders. (Which I've already described as bozos.) There are many complex and international factors which are hurting our economy. To blame it on the war, especially without knowledge of our financial system, is presumptuous. Perhaps you can understand it this way...the war is costing us trillions to wage. Who are we paying? Ourselves. One could (I wouldn't because of the insinuation I'm sure you'd come up with) call it an 'investment', even.

As I said, I've not been discussing the good or bad of the war itself, only the historical consequences of war. Your need to read things into my writing and direct insults at me is off-base.

EDIT: Mort, you can make statements and assertations all you want. But why don't YOU try a logical and defensible argument for why and how the war degrades our economy. It's easy to make the statement. That's all you've done. It's a bit tougher to understand the global and local economics and to prove it. Just because the war costs lots of money does not mean it's the reason for our economic woes. That's the point I was making with the schools analogy.

 

[Tomorrow]

Sorry, war merely enlarges and empowers the state.
Mort

I keep reading this, and dang if I don't agree whole-heartedly with you, Mort. (Of course LOSING a war has the opposite effect.) In fact, I'd say just about anything the state does enlarges and empowers AND perpetuates itself. Taxing it's citizens of course was the brutal birth of this monster. The state will tell you that this taxation is for the "common good", but we know better, eh?! (We showed the Brits back in 1776, by golly. Oh oh...we did have a war over it, though. Eek. )

What ever happened to common, decent ol' benevolent anarchy we marched the streets for? I miss the '60's. I think I'll go find a flower to pick and someone to love.

 

[jamie2112]

MAKE HT NOT WAR........

 

[Tomorrow]

MAKE HT NOT WAR........

LOL, I think you're on to something here, Jamie!!

 

[MinusTheBear]

Are Wars Good for the Economy? Give this a whirl......

http://economics.about.com/od/warandtheeconomy/a/warsandeconomy.htm

 

[Tomorrow]

Are Wars Good for the Economy? Give this a whirl......

http://economics.about.com/od/warandtheeconomy/a/warsandeconomy.htm

\m/ ... good article, Bear.

But it's not quite relevant. The trouble is we weren't talking about any economic benefits of the war. We (I) were (was) discussing the lack of proof that the war in Iraq has caused our sour economy. That has been stated but not proven.

And...I'll only repeat what I said earlier...after every war of the 20th century, there was a notable economic upturn in our economy. I'm not judging anything or any war, or making any value assessment here. I'm just reporting the facts as I know them.

 

[Davemcc]

Are Wars Good for the Economy? Give this a whirl......

http://economics.about.com/od/warandtheeconomy/a/warsandeconomy.htm

Minus,

I did intend to bring up the broken window argument here, but your quote troubles me in accrediting the argument to Hazlitt. The theory was written as part of a larger essay by Frederic Bastiat about 100 years earlier, in 1850. http://bastiat.org/en/twisatwins.html It is as true today as it was then and should be understood by more people, IMO. I just wish proper credit were given.

RJ,

I hope you take the time to read the link above and maybe read some of Bastiat's other essays.

 

[Davemcc]

We realized no major profitable arms sales to anyone when we were fighting Korea, Viet Nam, Desert Storm, or even Bosnia. (We supplied free equipment to the fighters on our side in those wars...but no notable sales.) Yet the U.S. experienced large bumps in economy as a result of these wars, and the WW's. By all current economic measures, GNP, worker productivity, currency value, employment rates, balance of trade (!!), etc....we benefitted from all of these military activities.

But the facts are that if you look at the U.S. economic indicators after all these wars, you'll find accelerated growth. And again, all I said was that war historically improves the U.S. economy and is not the reason for our current poor economic state of affairs.

When one corrolates market trends with the end of America's wars, you will see that there was an immediate negative effect and a lasting negative effect that is unseen, in the sense of Bastiat's essay "That Which is Seen and That Which is Unseen". Following the American pullout of Korea in 1953, America entered a rather severe depression in 1958 that took a couple of years to recover from. The "positive" economic effects of the war were artificial and transient as described above by other posters. Once the artificial employment boost of having soldiers overseas who might otherwise have been working ended and once the spending on war related goods and services stopped, the economy could no longer support such artificially high levels of activity.

Following the pullout of the U.S. from Vietnam in 1974, the economy fell into recession again by 1977 and remained weak until the mid-80's. Remember stagflation, gas rationing, $800/oz gold, Chrysler on the brink of bankruptcy and Lee Iacoca getting gov't loan guarantees, people turning in their home keys to the bank because of 22% mortgage rates.

The first Gulf War wasn't really a war in the traditional sense. It didn't last very long at all and didn't require a drawn out land invasion or occupation force. Nevertheless, by 2000 the economy slowed once again, not as pronounced as previously but in proportion to the net effect the war had on the economy.

So you see, the perceived economic advantage of the wartime economy is offset in reduced or negative economic activity once the transition to a peacetime economy is effected.

The unseen negative economic impact of all the wars combined is the net increase in long-term national debt and the resulting taxation that endures for a number of decades to pay for those wars. Increased taxation causes a number of negative economic factors, i.e. reduced disposable income (lower consumer spending), higher credit costs, lower currency valuation, etc. Had these wars and their combined debt not contributed to draining the incomes of taxpayers and limiting the financing options of the government, the standard of living of every American would have been much higher than it is today. That is the unseen potential that can never be realized because America did fight these wars and continues to pay for them on the back of the ever more beleaguered taxpayer.

 

[MinusTheBear]

Minus,

I did intend to bring up the broken window argument here, but your quote troubles me in accrediting the argument to Hazlitt. The theory was written as part of a larger essay by Frederic Bastiat about 100 years earlier, in 1850. http://bastiat.org/en/twisatwins.html It is as true today as it was then and should be understood by more people, IMO. I just wish proper credit were given.

RJ,

I hope you take the time to read the link above and maybe read some of Bastiat's other essays.

Yes Hazlitt work is based on on Frédéric Bastiat's essay Ce qu'on voit et ce qu'on ne voit pas (What is Seen and What is Not Seen). The author did not acknowledge Hazlitt with coming up the Broken Window Fallecy, there is no plagarism here. I agree however the author should have mentioned in the article that Hazlitts research is an extension of Bastiat earlier work.

 

[Tomorrow]

Minus,
RJ,

I hope you take the time to read the link above and maybe read some of Bastiat's other essays.

I did. It's a good essay. I'll check out others. Thanks, Dave.

 

[Tomorrow]

When one corrolates market trends with the end of America's wars, you will see that there was an immediate negative effect and a lasting negative effect that is unseen, in the sense of Bastiat's essay "That Which is Seen and That Which is Unseen". Following the American pullout of Korea in 1953, America entered a rather severe depression in 1958 that took a couple of years to recover from. The "positive" economic effects of the war were artificial and transient as described above by other posters. Once the artificial employment boost of having soldiers overseas who might otherwise have been working ended and once the spending on war related goods and services stopped, the economy could no longer support such artificially high levels of activity.

Following the pullout of the U.S. from Vietnam in 1974, the economy fell into recession again by 1977 and remained weak until the mid-80's. Remember stagflation, gas rationing, $800/oz gold, Chrysler on the brink of bankruptcy and Lee Iacoca getting gov't loan guarantees, people turning in their home keys to the bank because of 22% mortgage rates.

The first Gulf War wasn't really a war in the traditional sense. It didn't last very long at all and didn't require a drawn out land invasion or occupation force. Nevertheless, by 2000 the economy slowed once again, not as pronounced as previously but in proportion to the net effect the war had on the economy.

So you see, the perceived economic advantage of the wartime economy is offset in reduced or negative economic activity once the transition to a peacetime economy is effected.

The unseen negative economic impact of all the wars combined is the net increase in long-term national debt and the resulting taxation that endures for a number of decades to pay for those wars. Increased taxation causes a number of negative economic factors, i.e. reduced disposable income (lower consumer spending), higher credit costs, lower currency valuation, etc. Had these wars and their combined debt not contributed to draining the incomes of taxpayers and limiting the financing options of the government, the standard of living of every American would have been much higher than it is today. That is the unseen potential that can never be realized because America did fight these wars and continues to pay for them on the back of the ever more beleaguered taxpayer.

Dave, you have made a thoroughly thoughtful post. I'll have to mull it over for awhile. It makes a lot of sense. But I have lingering doubts about the direct cause of the economic downturn being the overextension of the wars. It seems right, but....

During the 20th century, the economies of Europe, Asia, and North America became very complex and intertwined. I can make a case for central bank interference at home and abroad causing much of the dips (that also appear war-cyclic). And countries, not just ours, have been printing money at an outrageous clip since WW1. This "counterfeit" money that Mort rails against has been printed by and diddled with various economies for a LONG time.

Keynes had his say in the matter too which I find of interest, especially with regard to your take on stagflation. Whether one adhers to his economic theories is a personal matter, however. International supply economics, increased oil pricing, inflating currencies, wage and price controls, political conditions, etc....there are many things that could be coupled with the very periods you have talked about being hit by downturns.

I have some cogitatin' to do.

 

[Tomorrow]

I'm generally not a wikipedia kind of guy. But I saw this and found it instructive.

http://en.wikipedia.org/wiki/Stagflation