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Can War Ever Be Economic?

HistoryPosted by David McDonagh Thu, October 02, 2014 18:12:13

The idea that war is good for society is very common. Not many economists endorse it, but Tyler Cowen is an exception. In The New York Times 13 June 2014, he suggested it might remedy the current sluggishness in the USA economy. He seems to think that war can be a stimulus. There has been too much peace.

The stark reality seems to contrast with Cowen’s thesis, as it seems to be that the wars have cost farl too much to almost everybody, but so, too, have normal politics and, indeed, the state itself.

Cowen is, despite this brave outburst, the sort of libertarian who likes to conform to the state. Like most economists, he tends to think that economics exists to aid the state to make economic policy. He might well agree with many people, economists and non-economists, that Alfred Marshall erred to brand the area, or the subject matter, economics instead of leaving it labelled as “political economy”. Keynes, whom Cowen also admires, attempted to reverse that but he failed.

Indeed, this war-eulogy outburst from Cowen shows this conformity to the state, as well as being a brave anti-social message. The state is, after all, the epitome of an anti-social institution, despite its rather successful attempt to get large numbers of people to think it is an obvious social boon. War is about as bad as politics gets, it is the acme of crass politics, but even normal politics is crass. It is intrinsically illiberal.

Cowen says he feels that war been lacking recently, or at least, it remains low by historical standards. He earlier supported the war in Iraq; odd for a libertarian, as is his conformity to Keynes and the endorsement of state action.He says that he “realistically” settles for as part of the package of modern life.

He says some headlines from Iraq recently might fool some people into thinking war is already abundant today but he says it is tame next to the killings of the 1914 or 1939 world wars that killed off tens of millions prior to 1950. Does he even think that killing itself can boost growth? He later replies that the growing destruction of war might be the thing that accounts for the current sluggish peace. But first he continues that even the killing in Vietnam killed more off than recent wars in the Middle East have done. All this abundant peace makes economic growth less urgent, he declares.

Cowen does not quite want to say that war improves economies, as he admits that it clearly destroys wealth, as well as lives. He is not endorsing the Keynesian rather popular meme, that preparing for war boosts state spending and so it puts people back to work, either. Instead he wants to say is what war tends to do is to aid the politicians to get things right. Competition such as war between states sharpens up any state so that it better aids the nation’s overall fitness. This tends to boost the GNP. He, later, suggests that it might boost it to 4% a year rather than the current best-hoped-for 2% a year.

If we look back at all the innovation war has aided in history then we might realise that a very good case can be made out for war, Cowan suggests. It might seem repugnant, but history suggests that war is an economic boon. He feels this case recently made out by a few historians and that it is not so easy to dismiss.

Cowen says that war aided nuclear power, the computer and the modern aircraft just as he passively accepts that the state can boost effective demand by stimulus rather than looking at the reality that the state merely broadens demand in such a way that the immediate result will be to lower it, overall, rather than to increase it, despite the fact that purchasing power will be transferred to new hands by inflation. Such a process is not likely to ever even conserve total demand at the same level let alone boost overall demand to new a higher level, as the Keynesians imagine. But Keynes said it, so Cowen conforms to it. He is similar with the historians in doing that.

Cowen continues that war in the past got the USA state to push forward many new innovations along. This is what history teaches us, he seems to say. Not for Cowen the extreme idea of Henry Ford that “history is bunk”. But as it is written, it all too often seems to be, especially on the benefits of war.

Cowen tells us that the Internet was designed to conduct a nuclear exchange and Silicon Valley too was innovated by the military. It was the late USSR that, with Sputnik, boosted the USA to try to catch up by developing science and technology in reaction. Here we seem to have one economist, Cowen, who much prefers history as it is presented to him than to thinking about the opportunity costs of whatever the state did. He admires the sheer efficiency of the Manhattan Project but he tends to overlook that the bomb was no social boon.

But war makes the state efficient; Cowen seems to think, or at least to say. He feels that Japan might wake up now that China is pressurising it with revenge for the 1930s in mind, but Western Europe lacks that sort of vital external threat. That is why European states are so sluggish. He seems to have forgotten the fact that they can tax so have no need to earn their keep.

We are told of three books by recent historians that make the case further: War! What is it Good For?(2014) Ian Morris, War and Gold (2014) Kwasi Kwarteng and War in Human Civilisation (2006) Azar Gat, the last cited on which Cowen feels the two new books are both based on.

But Cowen feels the main problem with all this is that war can be so much more destructive today. This seems like Cowen himself is waking up to the weakness of his new shocking thesis.

So it is not the useful as a means of getting out of economic stagnation that it used to be, after all. Cowen feels that we are in a trade-off between more growth with war in exchange for less growth with peace. This latter option brings Politically Correct things like tolerance for minorities and sometime persecuted groups. Cowen reflects that this might be the better result than more growth and war together might bring. He somewhat returns to normality at the end of his article.

I think Cowen is over impressed with the GNP in any case, just as he is with Keynes. A lot that passes for economic growth looks like a misnomer, as adding the costs of the funeral services of tragic victims of road accidents makes for a higher GNP out of clear losses. Nearly every economics textbook lists some of the many anomalies with the meme of GNP.

War is clearly an all-round risk to people that generally reverses economic well-being, and that should be as clear to Cowen as is the nose on his face. As a critic of economics rather than an economist, it seems to me that Cowen ought to attempt weigh up, by opportunity cost, what the backward historians say rather than to accept whatever happened as what best needed to happen, at least to a far greater extent than he seems to have done.

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