Economics of War


Morgan O. Reynolds

I was asked by the Hot Springs Village Skeptics to give a seminar talk on the economics of war on November 8, 2018.  Here are my notes for that presentation.

A more accurate title?  Political Economy of Empire and War
Carl von Clausewitz famously defined war as follows: “War is the continuation of politics by other means.”
Or Webster’s Third New International Dictionary on my dictionary stand stated it as “War: a state of usu. open and declared armed hostile conflict between political units (as states or nations)” [or, we might amend it as at least one party is a state which allows for civil wars and armed revolutions]
Then we have government’s other “wars”: War on poverty, alcohol (WWI origin, continued postwar via the ratchet effect in general), drugs, disease, etc.  This abuse of language trades on the absurd reputation of the glories of the state stemming from its frequent indulgence in mass murder and destruction.  By the way, who won those domestic wars, say, the war on drugs?  Drugs.

I thanked member Peter Trabant for his suggestion of this most important topic, warfare.

“The ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.” —J.M. Keynes,
The General Theory of Employment, Interest and Money, 1936 (the so-called “new economics”)
[“Law of Seven Mentionings” once-upon-a-time told to me by an editor of the Washington Times]

Critic Arthur Shenfield: “JMK was clever but lacking wisdom.”
Critic Henry Hazlitt: “I have been unable to find in [Lord Keynes’ opus magnum] a single
important doctrine that is both true and original.”

On August 18, 2018 I attended the Ron Paul Institute for Peace and Prosperity
Conference on War and Media at Dulles Airport Marriott Hotel.  My interview with Richard Syrett about the RPI Conference.

Organizer Daniel McAdams said in his introductory remarks: RPI predicted to die shortly. Nope.  Anti-interventionist U.S. foreign policy?  “We’re it!” although also new (?) Committee for Responsible Foreign Policy: headline: “Demanding Congress Authorize Wars Would Lead to Fewer Wars”; after all, in the U.S. Constitution specifies “Article I Section 8: The Congress shall have Power…To declare War,” an exclusive power of the Congress, not the Executive.

Look at the Founders’ original ideas on America’s foreign policy:
George Washington’s Farewell Address in 1797: “The Great Rule of conduct for us,
in regard to foreign Nations is in extending our commercial relations, to have with
them as little political connection as possible…’Tis our true policy to steer clear of
permanent Alliances, with any portion of the foreign world.”

Thomas Jefferson: “Commerce with all nations, alliance with none, should be our motto.”
–to T. Lomax, 1799.
“The presumption of dictating to an independent nation the form of its government is so arrogant, so atrocious, that indignation as well as moral sentiment enlists all our partialities and prayers in favor of one and our equal execrations against the other.” —to J. Monroe, 1823.
“The preservation of the holy fire [of liberty] is confided to us by the world, and the sparks which will emanate from it will ever serve to rekindle it in other quarters of the globe.”
—to Rev. Knox, 1810.

John Quincy Adams (1767-1848) when Secretary of State (1817-25) in 1821: “…she [America] goes not abroad, in search of monsters to destroy. She is the well-wisher to the freedom and independence of all…[America’s] glory is not dominion, but liberty. Her march is the march of the mind. She has a spear and a shield: but the motto upon her shield is, Freedom, Independence, Peace. This has been her Declaration: this has been, as far as her necessary intercourse with the rest of mankind would permit, her practice.”

Ron Paul pointed out during his keynote speech at the August conference: General Gage, British commander at the Lexington and Concord battles famously begun on April 19, 1775: “We have been vanquished by an idea, a belief in human rights.”

The key role of ideas implies important political problems, e.g., a foreign invader often has no legitimacy, apparently overlooked by U.S. foreign policy “experts.”

Ron Paul remarked: Did I want to go fight in Vietnam? Hell no!

Col. Lawrence Wilkerson, whose claim to fame is chief of staff to Colin Powell, former secretary of state: Yemen is “first class disaster,” U.S. for the next half century will be in an unwinnable war in Afghanistan (252,000 sq. mi. almost size of Texas) because of the U.S. eye on China and Pakistan.  Wilkerson also took a shot at [warmonger] “Tom Cotton and his band of morons.”
Col. Douglas Macgregor, who appears on the Fox News channel occasionally, led 1,100 U.S. soldiers and a bunch of tanks and Bradleys into Iraq in Gulf War I under “Poppy” Bush, slicing rapidly through little opposition and then was ordered to halt.  While waiting Sgt. Nels Muller was killed by an antitank missile or similar.  His remains could fit in a cigar box.  What was the point?  How could Macgregor explain to Muller’s family why he died?  What for?  To leave the evil Saddam in power?
During the lunch panel discussion, Jeff Deist, president of the Mises Institute, made an important point: war and the Federal Reserve are great cross-over issues, neither one a monopoly of the left or right, and America lacks an appetite for war, much less seven simultaneously.

But I have a Confession to make: war movies are some of my favorites:
Bridge on the River Kwai: “Madness, madness” by the doc at the end(1957), a constant refrain by yours truly, Paths of Glory (1957, Kubrick), Dr. Strangelove (1964 Kubrick), Das Boot (1981), Full Metal Jacket (1987, Kubrick), The Hunt for Red October (1990), Hotel Rwanda (2004), Blackhawk Down (2001, Ridley Scott) (“Only the dead have seen the end of war,” has been misattributed to Plato, correction: George Santayana)
In preparation for filming Blackhawk Down, Actor Tom Sizemore said, “What really got me at training camp was the Ranger Creed. I don’t think most of us can understand that kind of mutual devotion. It’s like having 200 best friends and every single one of them would die for you.”

Want more econ by Reynolds?
Richard Syrett

Are economists smart?  Yes according to the work of Stephen Hsu,
Hsu converted graduate student 2002 GRE scores V + Q + A to IQ results by discipline:
130.0 Physics
129.0 Mathematics
128.5 Computer Science
128.0 Economics
127.5 Chemical engineering
127.0 Material science
126.0 Electrical engineering
125.5 Mechanical engineering
125.0 Philosophy
124.0 Chemistry
123.0 Earth sciences

122.0 Industrial engineering
122.0 Civil engineering
121.5 Biology
120.1 English/literature
120.0 Religion/theology
119.8 Political science
119.7 History
118.0 Art history
117.7 Anthropology/archeology
116.5 Architecture
116.0 Business
115.0 Sociology
115.0 Undergraduates
114.0 Psychology
114.0 Medicine
112.0 Communication
109.0 Education
106.0 Public administration

Kinda lines up the way I would expect except for Medicine, which is no higher than the average undergraduate.

But intelligence is not everything.  As George Stigler of the University of Chicago used to say: “In economics IQ points are a dime a dozen.”  I once had lunch with Glen Hubbard, retiring Dean of Columbia University Business School, an example of a guy who could talk faster than I can think.

Yes, true, special interests are important yet ideas rule the world.  (When I shout “madness” about U.S. wars as I read the morning news, my wife calmly points out, “No, somebody’s making money.”

OK, two “counterexamples” of the power of $ interest: “State Department Team Led by Former Raytheon Lobbyist Pushed Mike Pompeo to Support Yemen War Because of Arms Sales.”  Acting Assistant Secretary of State Charles Faulkner “oversees a team of 30 foreign affairs officers `responsible for the Department’s day-to-day relationship with Congress on legislation, budget and appropriations, and foreign policy,’” according to the agency website.  Thirty people on the State Department payroll for Congressional relations alone?  Sheeez.  No wonder the dear departed Rex Tillerson was trying to cut State’s bureaucracy.

Smedley D. Butler, War Is a Racket, 1935 is a nice reference on interest groups steering our military.  Butler was a U.S. Marine Corps Major General and two-time Medal of Honor recipient.

And Dwight D. Eisenhower, who opposed the atomic bombing of Japanese cities,  poignantly said:
“Every gun that is made, every warship launched, every rocket fired
signifies in the final sense, a theft from those who hunger and are not fed,
those who are cold and not clothed. This world in arms is not spending money
alone. It is spending the sweat of its laborers, the genius of its scientists, the
hope of its children. This is not a way of life at all in any true sense. Under the
clouds of war, it is humanity hanging on a cross of iron.”

Yet the necessity of propaganda confirms the key role of ideas. “In the long run there cannot be any such thing as an unpopular system of government.”—Mises, p. 859.

Now let’s turn to Ludwig von Mises (1881-1973), Human Action: A Treatise on Economics, 1949 [1998], for his economic analysis of war.  Among a distinguished group  because economics is so important, Mises was one of its greatest thinkers.
p. 168-9
“…racial hatred is not a natural phenomenon in man. It is the product of ideologies. But even if such a thing as a natural and inborn hatred between various races existed, it would not render social cooperation futile and would not invalidate Ricardo’s theory of association. Social cooperation has nothing to do with personal love or with a general commandment to love one another. People do not cooperate under the division of labor because they love or should love one another. They cooperate because this best serves their own interests…rightly understood selfishness is what originally impelled man to adjust himself to the requirements of society, to respect the rights and freedoms of his fellow man and to substitute peaceful collaboration for enmity and conflict.” [Jack Hirshleifer: “The world runs on self interest and the whole world knows it”; Ayn Rand: “I love you”…first word is “I”; Russian economist Yuri Maltsev: “In the Soviet Union it was claimed ‘The [socialist] system is good, only the people are bad”: “From each according to his ability, to each according to his needs”: or, we might say it suits ants but not the species known as humans].
“The struggles in which primitive hordes and tribes fought one another for watering places, hunting and fishing grounds, pastures and booty were such pitiless wars of annihilation. They were total wars…another mode of procedure began to develop. People preserved even in warfare some rudiments of social relations previously established…they began to take into account the idea that between human beings, notwithstanding their immediate enmity, a later arrangement and cooperation is possible. Wars were waged to hurt the foe; but the hostile acts were no longer merciless and pitiless in the full sense of the terms…Above the implacable hatred and frenzy of destruction and annihilation a societal element began to prevail. The idea emerged that every human adversary should be considered as a potential partner in a future cooperation, and that this fact should not be neglected in the conduct of military operations. War was no longer considered the normal state of interhuman relations. People recognized that peaceful cooperation is the best means to carry on the struggle for biological survival…more advantageous to enslave the defeated than to kill them…a preliminary step toward cooperation.”

p. 170
“[Civilization] has enabled man to hold his own in the struggle against other living beings both the beasts of prey and the even more pernicious microbes; it has multiplied man’s means of sustenance; it has made the average man taller, more agile, …given man the uncontested mastery of the earth; multiplied population figures and raised the standard of living to a level never dreamed of by the crude cave dwellers of prehistoric ages.”

pp. 147-8
“The historical role of the theory of the division of labor as elaborated by British political economy from [David] Hume to [David] Ricardo consisted in the complete demolition of all metaphysical doctrines concerning the origin and the operation of social cooperation…It substituted an autonomous rational morality for the heteronomous and intuitionist ethics of older days…The utilitarian economist…does not ask a man to renounce his well-being for the benefit of society. He advises him to recognize what his rightly understood interests are…creatures with reason and the urge toward the pursuit of happiness.”
“…For the faithful believer there cannot be any doubt; he is fully confident that he has espoused the only true doctrine. But it is precisely the firmness of such beliefs that renders the antagonisms irreconcilable. Each party is prepared to make its own tenets prevail. But as logical argumentation cannot decide between dissenting creeds, there is no means left for the settlement of such disputes other than armed conflict. The nonrationalist, nonutilitarian, and nonliberal social doctrines must beget war and civil wars until one of the adversaries is annihilated or subdued. The history of the world’s great religions is a record of battles and wars, as is the history of the present-day counterfeit religions socialism, statolatry, and nationalism.”
“Intolerance and propaganda by the executioner’s or the soldier’s sword are inherent in any system of heteronomous ethics…The idea of tolerance with regard to other people’s dissenting views could take root only when the liberal doctrines had broken the spell of universalism.”
[heteronomous: subject to external controls and impositions; originating outside the self or one’s own will; heteronomy: a subjection to something else; a subordination to the law or subordination of another; the condition of lacking moral freedom or self-determination.]

pp. 228-9
“…war loans…In the heyday of liberalism some Western nations really retired parts of their long-term debt by honest reimbursement. But for the most part new debts were only heaped upon old ones. The financial history of the last century shows a steady increase in the amount of public indebtedness. Nobody believes that the states eternally drag the burden of these interest payments. It is obvious that sooner or later all these debts will be liquidated in some way or other, but certainly not by payment of interest and principal to the terms of the contract. A host of sophisticated writers are already busy elaborating the moral palliation for the day of final settlement.

pp. 498-99
“…disappearance of the international capital market…abolishes the freedom of access to natural resources. If one of the socialist governments of the economically backward nations lacks the capital needed for their utilization of its natural resources, there will be no means to remedy this situation. If this system had been adopted a hundred years ago, it would have been impossible to exploit the oil fields of Mexico, Venezuela, and Iran, to establish the rubber plantations in Malaya or to develop the banana production of Central America. It is illusory to assume that the advanced nations will acquiesce in such a state of affairs. They will resort to the only method which gives the access to badly needed raw materials; they will resort to conquest. War is the alternative to freedom of foreign investment as realized by the international capital markets.”
“The inflow of foreign capital did not harm the receiving nations. It was European capital that accelerated considerably the marvelous economic evolution of the United States and the British Dominions…Latin America…Asia…expropriations destroyed the international capital market.”
“Intergovernmental loans are no substitute for the functioning of an international capital market.”

pp. 645-6
“Many authors glorify war and revolution, bloodshed and conquest. Carlyle and Ruskin, Nietzsche, Georges Sorel, and Spengler [+ Ernst Haeckel, John McCain, John Bolton, Bill Kristol, Tom Cotton, etc.] were harbingers of the ideas which Lenin and Stalin, Hitler and Mussolini put into effect…heroic deeds of warriors and conquerors…The dawning age of manliness requires a new theory of human action…[sure] war and conquest were of utmost importance in the past and that Huns and Tartars, Vandals and Vikings, Normans and conquistadors played an enormous part in history…[yet] civilization is an achievement of the ‘bourgeois’ spirit, not of the spirit of conquest…need to emphasize
First: With private ownership of the means of production…the theorems of catallactics [elucidation of a system in which there are money prices (exchange ratios) and monetary calculation; the theory of the market economy] are strictly valid.
Second: If killing and robbing become so prevalent that any production appears useless, it may finally happen that productive work ceases and mankind lunges into a state of war of every man against every other man.
Third: In order to seize booty, something to be plundered must be available…The existence of producers is a condition for the survival of conquerors. But the producers could do without the plunderers.
Fourth: Champions of militarism are consistent in asking for the establishment of socialism. The whole nation should be organized as a community of warriors in which the noncombatants have no other task than that of supplying the fighting forces with all they need.
p. 662
War and commerce are two different things. Voltaire erred in 1764 in his Dictionnaire philosophique: ’To be a good patriot is to wish that one’s own community should enrich itself by trade and acquire power by arms; it is obvious that a country cannot profit but at the expense of another and that it cannot conquer without inflicting harm on other people.”
Voltaire deemed it superfluous to familiarize himself with economic thought. If he had read the essays of his contemporary David Hume, he would have learned how false it is to identify war and foreign trade…Foreign trade differs from domestic trade only in so far as goods and services are exchanged beyond the borderlines separating the territories of two sovereign nations…All the teachings of economics concerning the effects of the international division of labor and of international trade have up to now failed to destroy the popularity of the Mercantilist fallacy, “that the object of foreign trade is to pauperize foreigners.” [H.G. Wells characterizing the opinion of a typical representative of the British peerage.]

pp. 680-4
“Popular opinion sees the source of the conflicts which bring about civil wars and international wars of our age in the collision of ‘economic’ interests inherent in the market economy….It is certainly true that our age is full of conflicts which generate war…It is not capitalism that produces them but precisely the anticapitalistic policies designed to check the functioning of capitalism…etc. It is not sovereignty as such that makes for war, but sovereignty of governments not entirely committed to the principles of the market economy.
“What is needed to make peace durable is neither international treaties and covenants nor international tribunals and organizations like the defunct League of Nations or its successor, the United Nations. [Charles de Gaulle*: “Like girls and roses, treaties last as long as they last.”] If the principle of the market economy is universally accepted, such makeshifts are unnecessary; if it is not accepted, they are futile. Durable peace can only be the outgrowth of a change in ideologies. As long as the peoples cling to the Montaigne dogma and think that they cannot prosper except at the expense of other nations, peace will never be anything other than a period of preparation for the next war.”
“Economic nationalism is incompatible with durable peace. …Suppose Indian tribes of North America recognized as sovereign…right to exclude foreigners from exploiting their rich natural resources which they did not know how to utilize…so charter would prevent European invasion? [Does anybody believe that?]”
“…The philosophy of protectionism is a philosophy of war. The wars of our age are not at variance with popular economic doctines; they are, on the contrary, the inescapable result of a consistent application of these doctrines…the League of Nations failed because it lacked the spirit of genuine liberalism. It was a convention of governments imbued with the spirit of economic nationalism and entirely committed to the principles of economic warfare…The two decades of the League’s functioning were marked by each nation’s adamant economic warfare against all other nations. The tariff protectionism of the years before 1914 was mild indeed when compared with what developed in the ‘twenties and ‘thirties—viz., embargoes, quantitative trade control, foreign exchange control, monetary devaluation, and so on.” [e.g., U.S. Smoot Hawley tariffs]
“The prospects for the United Nations are not better, but rather worse. Every nation looks upon imports, especially upon imports of manufactured goods, as upon a disaster…Almost all nations are fighting against the specter of an unfavorable balance of trade. They do not want to cooperate, they want to protect themselves against the alleged dangers of cooperation.”

pp. 817-28
“The market economy involves peaceful cooperation. It bursts asunder when the citizens turn into warriors and, instead of exchanging commodities and services, fight one another.
…primitive tribes…no cooperation…unlimited or total wars…no treaty possible.
In the sixteenth century a Frenchman, Bodin, developed the theory of national sovereignty. In the 17th a Dutchman, Grotius, added to it a theory of international relations in war and peace.
With disintegration of feudalism…king nationalized armed forces, so warriors were the king’s mercenaries. Finances restricted their designs on conquest…fear a coalition…limited warfare in three centuries preceding French revolution…War concerned rulers only. Even belligerent armies respected the ‘neutrality’ of the civilians…property of the civilians was considered inviolable. In 1856 the Congress of Paris made an attempt to extend this principle to naval warfare. More and more, eminent minds began to discuss the possibility of abolishing war altogether.
…The people themselves do not derive any gain from victory…[Popular argument]: Democracies are peaceful…What is needed to make peace durable is to dethrone the despots…Napoleon stopped by a coalition of all European powers…revived idea of durable peace…in the much abused principles of the Manchester School. These British liberals…keen enough to realize that what can safeguard durable peace is not simply government by the people but under unlimited laissez faire.
All the military art and administration do not explain why modern nations prefer aggression to peace…What has transformed the limited war between royal armies into total war, the clash between peoples, is not technicalities of military art, but the substitution of the welfare state for the laissez-faire state…Napoleon would not have made the citizens of France more prosperous…But if Hitler had realized his plans, the Germans expected to enjoy a higher standard of living…The struggle for more Lebensraum was their own war.
Under laissez faire peaceful coexistence of a multitude of sovereign nations is possible. Under government control of business it is impossible. It is a war against trade and migration barriers…against equalization of wage rates, of farmers tilting poor soil against governments barring them from more fertile soil, the “have-nots,” against the wage earning and farming “haves.”
War, in any case modern total war, peremptorily requires government control of business…”war socialism” then “reconversion” requires even more control, why even go ‘back’ to the old social system? [Professors in charge!]

KEY: Economic nationalism, the necessary complement of domestic interventionism, hurts the interests of foreign peoples and thus creates international conflict. It suggests the idea of amending this unsatisfactory state of affairs by war. Why should a powerful nation tolerate the challenge of a less powerful nation?…Interventionism generates economic nationalism, and economic nationalism generates bellicosity. If men and commodities are prevented from crossing the borderlines, why should not the armies try to pave the way for them?
Modern war is merciless, it doers not spare pregnant women or infants; it is indiscriminate killing and destroying. It does not respect the rights of neutrals. Millions are killed, enslaved, or expelled from the dwelling places in which their ancestors lived for centuries…next chapter of this endless struggle?
…root of the evil is not the construction of new, more dreadful weapons. It is the spirit of conquest. Hegel coined the phrase ‘the futility of victory.’ To defeat the aggressors is not enough to make peace durable. The main thing is to discard the ideology that generates war.

Murray Rothbard: The Irrepressible Rothbard, 2000

p. 156
An embargo is bad enough; a blockade is, by any standards of international law, an act of war. That’s why the Bush administration insisted on calling the blockade an ‘interdiction.’ Rubbish.
Bush…thereby giving no warning and no time for American citizens to leave Kuwait or Iraq before hostilities started…Hussein’s detention of 2,500 American citizens is not a ‘barbaric’ or megalomaniacal ‘taking of hostages.’…18th and 19th century ‘laws of war,’ a product of Catholic teaching and libertarian international law, brilliantly separated ‘government’ and ‘military’ from ‘civilian.’…bade governments not to injure civilians but only to injure each other…civilians not to serve as targets of war. But Bush blockaded all exports of oil, but also all imports of food, upon which the Iraqi people depend…food never considered contraband, and was supposed to be allowed to pass…If the blockade is effective, Mr. Bush will be a mass murderer of innocent civilians.

Saudi Arabia? Endless commitment; permanent war for permanent peace; war footing; and enormous continuing military budgets, are our future.

Topple Saddam’s regime? Greatest cost of all. Occupy Iraq forever?


Unconditional surrender? A demand that maximizes the war and mass murder. Iraq 8 years vs. Iran b/c Ayatollah insisted that a non-negotiable war aim was the removal of Saddam from power. Peace unachievable short of eradication of the enemy.

Road Runner magazine article on Afghanistan—no money? Cattle! Pictures of children unclaimed

WWII: worshipped by modern liberals and neocons, the “last good war”; the “greatest generation”; struggle for German lebensraum, Japan both resource poor; continuation of WWI, Treaty of Versailles, “war to end all wars,” “self-determination,” Permanent war to secure permanent peace.

Robert Stinnett, Day of Deceit, footnote 38: “For reaction to the so-called United States ultimatum of November 26, 1941, see…comment…by Ensign Kazuo Sakamaki, the Japanese midget sub commander captured as Prisoner of War Number 1 when his sub ran aground on Oahu on December 7: “Your honorable ‘have’ country placed an economic blockade on the ‘have not’ country.”

Example: Lt. Commander Arthur H. McCollum’s October 7, 1940, 8-step plan to cause the Japanese (146,000 sq. miles, about same size as Montana #4; Arkansas 53,000 sq. mi., #29; Germany 138,000 sq. mi.) to fire the first shot:

Make an arrangement with Britain to use its bases in Pacific, esp. Singapore
Make an arrangement with Holland to use its bases and supplies in Dutch East Indies
All possible aid to Chinese Government of Chiang-Kai-shek
Send division of heavy cruisers to Orient, Philippines, or Singapore (“pop-up” cruises)
Send two divisions of submarines to Orient
Keep main strength of U.S. Pacific Fleet in vicinity of Hawaiian Islands
Insist Dutch refuse to grant Japanese trade, particularly oil
Total U.S. embargo of all U.S. trade with Japan along with similar embargo by British empire

(Prince) Konoye government collapsed October 17, 1941, after peace plea for meeting rejected by FDR, replaced by Tojo Hideki, then Japanese army minister
Zero sum game fallacy: your gain is my loss

Anglo-American legal doctrine: competition is not a tort [noncontractual wrong] vs. “paranoid military” and nation-state rivalry, the great international chessboard

Empire: “Global Hegemony”

Necessary enemies

Enthusiasm for regime change and nation-building

Robert Merry: China is playing the long game while Washington expends resources and global political capital on wars it cannot win. America’s devotion to intervention is sowing the seeds of its own demise and China will be the chief beneficiary. China invaded Vietnam in 1979…suffering an estimated tens of thousands of casualties in 27 days…quit and declared victory. As 6th century philosopher and general Sun Tau, author of  The Art of War, “there is no insistence of a nation benefiting from prolonged warfare.”

British Empire success via avoidance of prolonged land wars in favor of naval superiority.

Nuclear weapons
Fleet Admiral Wm. D. Leahy: “It is my opinion that the use of this barbarous [atomic] weapon at Hiroshima and Nagasaki was of no material assistance in our war against Japan. The Japanese were already defeated and ready to surrender because of the effective sea blockade and the successful bombing with conventional weapons…My own feeling was that in being the first to use it, we had adopted an ethical standard common to the barbarians of the Dark Ages. I was not taught to make war in that fashion, and wars cannot be won by destroying women and children.”

Nathan Bedford Forrest: “Get there first with the most.”

Logistics crucial, Naval power vastly underrated, air war glamorized;
Mises, p. 825: “…it was in the Civil War that, for the first time, problems of the interregional division of labor played the decisive role. The South was predominantly agricultural…As the naval forces of the Union were strong enough to blockade their coast, they soon began to lack needed equipment [manufactures from Europe].
The Germans in both World Wars had to face the same situation. They depended on the supply of foodstuffs and raw materials from overseas. But they could not run the British blockade. They lost because they failed in their efforts to cut off the British Isles from access to the world market and could not themselves safeguard their own maritime supply lines…their panacea was Ersatz, the substitute…inferior quality or higher cost or both together…warlike nation must aim at autarky”…[inefficient isolated economy].

Firing the first shot: False Flag attacks, Naval provocations, Gulf of Tonkin, etc.

Trade war (“futility of victory”) vs. Joseph Schumpeter: “creative destruction”


War Finance: 1) Conventional Taxation, 2) Borrowing/Debt, 3) Monetary Printing/Inflation, 4) Conscription (in-kind taxation)
Long run economic consequences of “temporary” wartime measures: withholding of personal income taxes by employers (Milton Friedman story); wage-price controls led to employer payment of medical insurance “credit card wars”: wars in Iraq, Afghanistan, Syria financed 60% by domestic borrowing, 40% by foreign borrowing; wasted savings; post-9/11 wars cost about $5.6 trillions. 1.1 million killed directly and indirectly

In 2011 Ron Paul predicted government default on its debt because “The reason we don’t cut spending is, one side loves entitlements and one side loves war.”

Corruption and Dysfunction: Audit the Pentagon? So far impossible. Too ugly to find out? The military deity has feet of clay.

*De Gaulle and the “U.S. Dollar Crisis”:

Wikipedia excerpt: In the Bretton Woods [NH] system put in place in 1944, US dollars were convertible to gold [the gold exchange standard, i.e., gold exchanged only among governments]. In France, it was called “America’s exorbitant privilege”] as it resulted in an “asymmetric financial system” where foreigners “see themselves supporting American living standards and subsidizing American multinationals.” As American economist Barry Eichengreen summarized: “It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one”.[221] In February 1965 President Charles de Gaulle announced his intention to exchange its US dollar reserves for gold at the official exchange rate. He sent the French Navy across the Atlantic to pick up the French reserve of gold and was followed by several countries. As it resulted in considerably reducing US gold stock and US economic influence, it led US President Richard Nixon to unilaterally end the convertibility of the dollar to gold on 15 August 1971 (the “Nixon Shock”). This was meant to be a temporary measure but the dollar became permanently a floating fiat money and in October 1976, the US government officially changed the definition of the dollar; references to gold were removed from statutes. [Ersatz gold standard]

Mao Zedong, “agrarian reformer” and greatest mass murderer in history: “Every Communist must grasp the truth, ‘Political power grows out of the barrel of a gun.’”

Robert Zubrin: “Are we destroyers or creators?”

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1 Response to Economics of War

  1. Thomas Potter says:

    Steven Hyde’s remark in That 70’s Show said it best…

    The three true branches of the government are military, corporate, and Hollywood!

    That ’70s Show (TV Series) Sunday, Bloody Sunday (November 1998)

    Donna Pinciotti: What’s the assignment?

    Eric Forman: All right: “In 1,000 words, describe the three branches of the United States government and their functions.” I’ll never make it.

    Steven Hyde: [Jackie says she has a paper on the subject she did last year, so she leaves to get it] Hey, what do I need Jackie for, man? I know more about this stuff than she does. The three true branches of the government are military, corporate, and Hollywood.

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