{"id":114234,"date":"2014-04-24T13:41:06","date_gmt":"2014-04-24T13:41:06","guid":{"rendered":"http:\/\/rinf.com\/alt-news\/?p=114234"},"modified":"2014-04-24T13:41:06","modified_gmt":"2014-04-24T13:41:06","slug":"war-makes-us-poor","status":"publish","type":"post","link":"http:\/\/rinf.com\/alt-news\/latest-news\/war-makes-us-poor\/","title":{"rendered":"War Makes Us Poor"},"content":{"rendered":"

Washington’s Blog<\/a>
\nReprinted with permission<\/p>\n

Top Economists Say War Is Bad for the Economy<\/strong><\/p>\n

Preface: Many Americans \u2014 including influential\u00a0economists<\/a>\u00a0and\u00a0talking heads\u00a0<\/a>–\u00a0still\u00a0wrongly assume that war is good for the economy. Many\u00a0congressmen<\/a>\u00a0assume that cutting pork-barrel military spending would hurt their constituents\u2019 jobs.<\/p>\n

As demonstrated below, it isn\u2019t true.<\/p>\n

Nobel-prize winning economist Joseph Stiglitz says that\u00a0war is bad for the economy<\/a>:<\/p>\n

\n

Stiglitz\u00a0wrote<\/a>\u00a0in 2003:<\/p>\n

\n

War is widely thought to be linked to economic good times.<\/strong>\u00a0The second world war is often said to have brought the world out of depression, and war has since enhanced its reputation as a spur to economic growth. Some even suggest that capitalism needs wars, that without them, recession would always lurk on the horizon.\u00a0Today, we know that this is nonsense.<\/strong>\u00a0The 1990s boom showed that peace is economically far better than war. The Gulf war of 1991 demonstrated that\u00a0wars can actually be bad for an economy<\/strong>.<\/p>\n<\/blockquote>\n

Stiglitz has also said that this decade\u2019s Iraq war has been\u00a0very bad\u00a0for the economy. Seethis<\/a>,\u00a0this<\/a>\u00a0and\u00a0this<\/a>.<\/p>\n<\/blockquote>\n

Former Federal Reserve chairman Alan Greenspan also said in that war is bad for the economy.\u00a0 In 1991, Greenspan said that\u00a0a prolonged conflict in the Middle East would hurt the economy<\/a>. And he\u00a0made this point again<\/a>\u00a0in 1999:<\/p>\n

\n

Societies need to buy as much military insurance as they need, but to spend more than that is to squander money that could go toward improving the productivity of the economy as a whole: with more efficient transportation systems, a better educated citizenry, and so on. This is the point that retiring Rep. Barney Frank (D-Mass.) learned back in 1999 in a House Banking Committee hearing with then-Federal Reserve Chairman Alan Greenspan. Frank asked what factors were producing our then-strong economic performance. On Greenspan\u2019s list:\u00a0\u201cThe freeing up of resources previously employed to produce military products that was brought about by the end of the Cold War.\u201d<\/strong>\u00a0Are you saying, Frank asked, \u201cthat\u00a0dollar for dollar, military products are there as insurance \u2026 and to the extent you could put those dollars into other areas, maybe education and job trainings, maybe into transportation \u2026 that is going to have a good economic effect?\u201dGreenspan\u00a0agreed.<\/strong><\/p>\n<\/blockquote>\n

Economist Dean Baker\u00a0notes<\/a>:<\/p>\n

\n

It is often believed that wars and military spending increases are good for the economy. In fact,\u00a0most economic models show that military spending diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment<\/strong>.<\/p>\n<\/blockquote>\n

The Proof Is In the Pudding<\/h3>\n

Mike Lofgren\u00a0notes<\/a>:<\/p>\n

\n

Military spending may at one time have been a genuine job creator when weapons were compatible with converted civilian production lines, but the days of Rosie the Riveter are long gone.\u00a0[Indeed, WWII was different from current wars in\u00a0many ways<\/a>, and so its economic effects are\u00a0not comparable<\/a>\u00a0to those of today’s wars.] Most weapons projects now require relatively little touch labor. Instead, a disproportionate share is siphoned into high-cost R&D (from which the civilian economy benefits little), exorbitant management expenditures, high overhead, and out-and-out padding, including money that flows back into political campaigns. A dollar appropriated for highway construction, health care, or education will likely create more jobs than a dollar for Pentagon weapons procurement.<\/p>\n

***<\/p>\n

During the decade of the 2000s, DOD budgets, including funds spent on the war, doubled in our nation\u2019s longest sustained post-World War II defense increase. Yet\u00a0during the same decade, jobs were created at the slowest rate since the Hoover administration<\/strong>.\u00a0If defense helped the economy, it is not evident<\/strong>. And just the wars in Iraq and Afghanistan added over $1.4 trillion to deficits,\u00a0according to the Congressional Research Service<\/a>. Whether the wars were \u201cworth it\u201d or merely stirred up a hornet\u2019s nest abroad is a policy discussion for another time; what is clear is that whether you are a Keynesian or a deficit hawk, war and associated military spending are no economic panacea.<\/p>\n<\/blockquote>\n

The Institute for Economics & Peace (IEP)\u00a0shows<\/a>\u00a0that any boost from war is temporary at best. For example, while WWII provided a temporary bump in GDP, GDP then fell back to the baseline trend. After the Korean War, GDP fell\u00a0below<\/em>\u00a0the baseline trend:<\/p>\n

\"\"<\/a><\/p>\n

IEP notes:<\/p>\n

\n

By examining the state of the economy at each of the major conflict periods since World War II, it can be seen that the\u00a0positive effects of increased military spending were outweighed by longer term unintended negative macroeconomic consequences<\/strong>. While the stimulatory effect of military outlays is evidently associated with boosts in economic growth, adverse effects show up either immediately or soon after, through\u00a0higher inflation, budget deficits, high taxes and reductions in consumption or investment<\/strong>. Rectifying these effects has required\u00a0subsequent painful adjustments<\/strong>\u00a0which are neither efficient nor desirable. When an economy has excess capacity and unemployment, it is possible that increasing military spending can provide an important stimulus. However,\u00a0if there are budget constraints, as there are in the U.S. currently, then excessive military spending can displace more productive non-military outlays in other areas such as investments in high-tech industries, education, or infrastructure<\/strong>. The crowding-out effects of disproportionate government spending on military functions can affect service delivery or infrastructure development, ultimately\u00a0affecting long-term growth rates<\/strong>.<\/p>\n

***<\/p>\n

Analysis of the macroeconomic components of GDP during World War II and in subsequent conflicts show heightened military spending had several adverse macroeconomic effects. These occurred as a direct consequence of the funding requirements of increased military spending. The U.S. has paid for its wars either through debt (World War II, Cold War, Afghanistan\/Iraq), taxation (Korean War) or inflation (Vietnam). In each case,\u00a0taxpayers have been burdened, and private sector consumption and investment have been constrained as a result<\/strong>. Other negative effects include\u00a0larger budget deficits, higher taxes, and growth above trend leading to inflation pressure<\/strong>. These effects can run concurrent with major conflict or via lagging effects into the future.\u00a0Regardless of the way a war is financed, the overall macroeconomic effect on the economy tends to be negative<\/strong>. For each of the periods after World War II, we need to ask, what would have happened in economic terms if these wars did not happen? On the specific evidence provided, it can be reasonably said, it is likely\u00a0taxes would have been lower, inflation would have been lower, there would have been higher consumption and investment and certainly lower budget deficits<\/strong>. Some wars are necessary to fight and the negative effects of not fighting these wars can far outweigh the costs of fighting. However if there are other options, then it is prudent to exhaust them first as once wars do start, the outcome, duration and economic consequences are difficult to predict.<\/p>\n<\/blockquote>\n

We\u00a0noted<\/a>\u00a0in 2011:<\/p>\n

\n

This is a no-brainer, if you think about it. We\u2019ve been in Afghanistan for almost twice as long as World War II. We\u2019ve been in Iraq for years longer than WWII. We\u2019ve been involved in\u00a07<\/a>\u00a0or\u00a08<\/a>\u00a0wars in the last decade. And yet [the economy is still unstable]. If wars really helped the economy, don\u2019t you think things would have improved by now? Indeed,the Iraq war alone could end up costing more than World War II<\/a>. And given the other wars we\u2019ve been involved in this decade, I believe that the total price tag for the so-called \u201cWar on Terror\u201d will definitely support that of the \u201cGreatest War\u201d.<\/p>\n<\/blockquote>\n

Let\u2019s look at the adverse effects of war in more detail \u2026<\/p>\n

War Spending Diverts Stimulus Away from the Real Civilian Economy<\/h3>\n

IEP\u00a0notes<\/a>\u00a0that \u2014 even though the government spending\u00a0soared<\/em>\u00a0\u2014 consumption and investment were\u00a0flat<\/em>during the Vietnam war:<\/p>\n

\"\"<\/a><\/p>\n

The New Republic\u00a0noted<\/a>\u00a0in 2009:<\/p>\n

\n

Conservative Harvard economist Robert Barro\u00a0has argued<\/a>\u00a0that increased military spending during WWII actually\u00a0depressed other parts of the economy<\/strong>.<\/p>\n<\/blockquote>\n

(New Republic also\u00a0points out<\/a>\u00a0that conservative economist Robert Higgs and liberal economists Larry Summers and Brad Delong have all shown that any stimulation to the economy from World War II has been greatly exaggerated.)<\/p>\n

How could war actually hurt the economy, when so many say that it stimulates the economy?<\/p>\n

Because of what economists call the \u201cbroken window fallacy\u201d.<\/p>\n

Specifically, if a window in a store is broken, it means that the window-maker gets paid to make a new window, and he, in turn, has money to pay others. However, economists long ago showed that \u2014 if the window hadn\u2019t been broken \u2014 the shop-owner\u00a0would have spent that money on\u00a0other things<\/em>, such as food, clothing, health care, consumer electronics or recreation<\/a>, which would have helped the economy\u00a0as much or more<\/em>.<\/p>\n

If the shop-owner hadn\u2019t had to replace his window, he might have taken his family out to dinner, which would have circulated more money to the restaurant, and from there to other sectors of the economy. Similarly, the money spent on the war effort is money that cannot be spent on\u00a0other sectors<\/em>\u00a0of the economy. Indeed, all of the military spending has just created military jobs,\u00a0at the expense\u00a0<\/em>of the civilian economy.<\/p>\n

As Austrian economist Ludwig Von Mises\u00a0pointed out<\/a>:<\/p>\n

\n

That is the essence of so-called war prosperity; it enriches some by what it takes from others. It is not rising wealth but a shifting of wealth and income.<\/p>\n<\/blockquote>\n

We\u00a0noted<\/a>\u00a0in 2010:<\/p>\n

\n

You know about America\u2019s unemployment problem. You may have even heard that the U.S. may very well have suffered a\u00a0permanent\u00a0destruction of jobs<\/a>.<\/p>\n

But did you know that the defense employment sector is booming?<\/p>\n

[P]ublic sector spending \u2014 and mainly defense spending \u2014 has accounted for virtually all of the new job creation in the past 10 years:<\/p>\n

\n

The U.S. has largely been financing job creation for ten years. Specifically, as the chief economist for BusinessWeek, Michael Mandel, points out, public spending has accounted for virtually all new job creation in the past 1o years:<\/p>\n

\n

Private sector job growth was almost non-existent over the past ten years. Take a look at this horrifying chart:<\/p>\n

\"longjobs1<\/p>\n

Between May 1999 and May 2009, employment in the private sector sector only rose by 1.1%, by far the lowest 10-year increase in the post-depression period.<\/p>\n

It\u2019s impossible to overstate how bad this is. Basically speaking, the private sector job machine has almost completely stalled over the past ten years. Take a look at this chart:<\/p>\n

\"longjobs2<\/p>\n

Over the past 10 years, the private sector has generated roughly 1.1 million additional jobs, or about 100K per year. The public sector created about 2.4 million jobs.<\/p>\n

But even that gives the private sector too much credit. Remember that the private sector includes health care, social assistance, and education, all areas which receive a lot of government support.<\/p>\n

***<\/div>\n

Most of the industries which had positive job growth over the past ten years were in the HealthEdGov sector. In fact, financial job growth was nearly nonexistent once we take out the health insurers.<\/p>\n

Let me finish with a final chart.<\/p>\n

\"longjobs4<\/p>\n

Without a decade of growing government support from rising health and education spending and soaring budget deficits, the labor market would have been flat on its back.\u00a0[120]<\/a><\/p>\n<\/blockquote>\n

***<\/p>\n

So most of the job creation has been by the public sector. But because the job creation has been financed with loans from China and private banks, trillions in unnecessary interest charges have been incurred by the U.S.<\/p>\n<\/blockquote>\n

And this shows military versus non-military durable goods shipments:\u00a0\"us<\/a>[Click here<\/a>\u00a0to view full image.]<\/p>\n

So we\u2019re running up our debt (which will eventually decrease economic growth), but the only jobs we\u2019re creating are military and other public sector jobs.<\/p>\n

PhD economist Dean Baker\u00a0points out<\/a>\u00a0that America\u2019s massive military spending on unnecessary and unpopular wars\u00a0lowers\u00a0economic growth and\u00a0increasesunemployment:<\/p>\n

\n

Defense spending means that the government is pulling away resources from the uses determined by the market and instead using them to buy weapons and supplies and to pay for soldiers and other military personnel. In standard economic models, defense spending is a direct drain on the economy, reducing efficiency, slowing growth and costing jobs.<\/p>\n<\/blockquote>\n

\n

A few years ago, the Center for Economic and Policy Research commissioned Global Insight, one of the leading economic modeling firms, to project the impact of a sustained increase in defense spending equal to 1.0 percentage point of GDP. This was roughly equal to the cost of the Iraq War.<\/p>\n

Global Insight\u2019s model projected that after 20 years the economy would be about 0.6 percentage points smaller as a result of the additional defense spending. Slower growth would imply a loss of almost 700,000 jobs compared to a situation in which defense spending had not been increased. Construction and manufacturing were especially big job losers in the projections, losing 210,000 and 90,000 jobs, respectively.<\/p>\n

The scenario we asked Global Insight [recognized as the most consistentlyaccurate<\/a>\u00a0forecasting company in the world] to model turned out to have vastly underestimated the increase in defense spending associated with current policy. In the most recent quarter, defense spending was equal to 5.6 percent of GDP. By comparison, before the September 11th attacks, the Congressional Budget Office projected that defense spending in 2009 would be equal to just 2.4 percent of GDP. Our post-September 11th build-up was equal to 3.2 percentage points of GDP compared to the pre-attack baseline. This means that the Global Insight projections of job loss are far too low\u2026<\/p>\n

The projected job loss from this increase in defense spending would be close to 2 million.\u00a0In other words, the standard economic models that project job loss from efforts to stem global warming also project that the increase in defense spending since 2000 will cost the economy close to 2 million jobs in the long run.<\/p>\n<\/blockquote>\n

The Political Economy Research Institute at the University of Massachusetts, Amherst has also\u00a0shown<\/a>\u00a0that\u00a0non-military spending creates more jobs than military spending.<\/p>\n

So we\u2019re running up our debt \u2014 which will eventually decrease economic growth \u2014 and creating many fewer jobs than if we spent the money on non-military purposes.<\/p>\n<\/blockquote>\n

High Military Spending Drains Innovation, Investment and Manufacturing Strength from the Civilian Economy<\/h3>\n

Chalmers Johnson\u00a0notes<\/a>\u00a0that high military spending diverts innovation and manufacturing capacity from the economy:<\/p>\n

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By the 1960s it was becoming apparent that turning over the nation\u2019s largest manufacturing enterprises to the Department of Defense and producing goods without any investment or consumption value was starting to crowd out civilian economic activities. The historian Thomas E Woods Jr\u00a0observes<\/a>\u00a0that, during the 1950s and 1960s, between one-third and two-thirds of all US research talent was siphoned off into the military sector. It is, of course, impossible to know what innovations never appeared as a result of this diversion of resources and brainpower into the service of the military, but it was during the 1960s that we first began to notice Japan was outpacing us in the design and quality of a range of consumer goods, including household electronics and automobiles.<\/p>\n

***<\/p>\n

Woods\u00a0writes<\/a>: \u201cAccording to the US Department of Defense, during the four decades from 1947 through 1987 it used (in 1982 dollars) $7.62 trillion in capital resources. In 1985, the Department of Commerce estimated the value of the nation\u2019s plant and equipment, and infrastructure, at just over $7.29 trillion\u2026\u00a0The amount spent over that period could have doubled the American capital stock or modernized and replaced its existing stock<\/strong>\u201d.<\/p>\n

The fact that we did not modernise or replace our capital assets is one of the main reasons why, by the turn of the 21st century,\u00a0our manufacturing base had all but evaporated<\/strong>. Machine tools, an industry on which Melman was an authority, are a particularly important symptom. In November 1968, a five-year inventory disclosed \u201cthat 64% of the metalworking machine tools used in US industry were 10 years old or older. The age of this industrial equipment (drills, lathes, etc.) marks the United States\u2019 machine tool stock as the oldest among all major industrial nations, and it marks the continuation of a deterioration process that began with the end of the second world war. This deterioration at the base of the industrial system certifies to the continuousdebilitating and depleting effect that the military use of capital and research and development talent has had on American industry<\/strong>.\u201d<\/p>\n<\/blockquote>\n

Economist Robert Higgs makes\u00a0the same point<\/a>about World War II:<\/p>\n

\n

Yes, officially measured GDP soared during the war. Examination of that increased output shows, however, that it consisted entirely of military goods and services.\u00a0Real civilian consumption and private investment both fell after 1941, and they did not recover fully until 1946. The privately owned capital stock actually shrank during the war<\/strong>. Some prosperity. (My article in the peer-reviewed\u00a0Journal of Economic History<\/a>, March 1992, presents many of the relevant details.)<\/p>\n

It is high time that we come to appreciate the distinction between the government spending, especially the war spending, that bulks up official GDP figures and the kinds of production that create genuine economic prosperity.\u00a0As Ludwig von Mises wrote in the aftermath of World War I<\/a>, \u201cwar prosperity is like the prosperity that an earthquake or a plague brings.\u201d<\/p>\n<\/blockquote>\n

War Causes Inflation \u2026 Which Keynes and Bernanke Admit Taxes Consumers<\/h3>\n

As we\u00a0noted<\/a>\u00a0in 2010, war causes inflation \u2026 which hurts consumers:<\/p>\n

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Liberal economist James Galbraith\u00a0wrote<\/a>\u00a0in 2004:<\/p>\n

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Inflation applies the law of the jungle to war finance. Prices and profits rise, wages and their purchasing power fall.\u00a0Thugs, profiteers and the well connected get rich. Working people and the poor make out as they can. Savings erode, through the unseen mechanism of the \u201cinflation tax\u201d\u00a0\u2013 meaning that the government runs a big deficit in nominal terms, but a smaller one when inflation is factored in.<\/p>\n

***<\/p>\n

There is profiteering. Firms with monopoly power usually keep some in reserve. In wartime, if the climate is permissive, they bring it out and use it.\u00a0Gas prices can go up when refining capacity becomes short \u2013 due partly to too many mergers. More generally, when sales to consumers are slow, businesses ought to cut prices \u2013 but many of them don\u2019t. Instead, they\u00a0raise\u00a0prices to meet their income targets and hope that the market won\u2019t collapse.<\/p>\n<\/blockquote>\n

Ron Paul\u00a0agreed<\/a>\u00a0in 2007:<\/p>\n

\n

Congress and the Federal Reserve Bank have a cozy, unspoken arrangement that makes war easier to finance. Congress has an insatiable appetite for new spending, but raising taxes is politically unpopular. The Federal Reserve, however, is happy to accommodate deficit spending by creating new money through the Treasury Department.\u00a0In exchange, Congress leaves the Fed alone to operate free of pesky oversight and free of political scrutiny. Monetary policy is utterly ignored in Washington, even though the Federal Reserve system is a creation of Congress.<\/p>\n

The result of this arrangement is inflation. And inflation finances war.<\/p>\n<\/blockquote>\n

Blanchard Economic Research\u00a0pointed out<\/a>\u00a0in 2001:<\/p>\n

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War has a profound effect on the economy, our government and its fiscal and monetary policies. These effects have consistently led to high inflation.<\/p>\n

***<\/p>\n

David Hackett Fischer is a Professor of History and Economic History at Brandeis. [H]is book, The Great Wave, Price Revolutions and the Rhythm of History \u2026 finds that \u2026\u00a0periods of high inflation are caused by, and cause, a breakdown in order and a loss of faith in political institutions. He also finds that war is a triggering influence on inflation, political disorder, social conflict and economic disruption.<\/p>\n

***<\/p>\n

Other economists agree with Professor Fischer\u2019s link between inflation and war.<\/p>\n

James Grant, the respected editor of Grant\u2019s Interest Rate Observer, supplies us with the most timely perspective on the effect of war on inflation in the September 14 issue of his newsletter:<\/p>\n

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\u201cWar is inflationary.\u00a0It is always wasteful no matter how just the cause. It is cost without income, destruction financed (more often than not) by credit creation. It is the essence of inflation.\u201d<\/p>\n<\/blockquote>\n<\/blockquote>\n

Libertarian economics writer Lew Rockwell\u00a0noted<\/a>\u00a0in 2008:<\/p>\n

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You can line up 100 professional war historians and political scientists to talk about the 20th century, and not one is likely to mention the role of the Fed in funding US militarism. And yet it is true:\u00a0the Fed is the institution that has created the money to fund the wars.\u00a0In this role, it has solved a major problem that the state has confronted for all of human history.\u00a0A state without money or a state that must tax its citizens to raise money for its wars is necessarily limited in its imperial ambitions. Keep in mind that this is only a problem for the state. It is not a problem for the people. The inability of the state to fund its unlimited ambitions is worth more for the people than every kind of legal check and balance. It is more valuable than all the constitutions every devised.<\/p>\n

***<\/p>\n

Reflecting on the calamity of this war, Ludwig von Mises\u00a0wrote<\/a>\u00a0in 1919<\/p>\n

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One can say without exaggeration that inflation is an indispensable means of militarism. Without it, the repercussions of war on welfare become obvious much more quickly and penetratingly; war weariness would set in much earlier.***<\/div>\n<\/blockquote>\n

\n

In the entire run-up to war,\u00a0George Bush just assumed as a matter of policy that it was his decision alone whether to invade Iraq. The objections by Ron Paul and some other members of Congress and vast numbers of the American population were reduced to little more than white noise in the background. Imagine if he had to raise the money for the war through taxes. It never would have happened.\u00a0But he didn\u2019t have to. He knew the money would be there. So despite a $200 billion deficit, a $9 trillion debt, $5 trillion in outstanding debt instruments held by the public, a federal budget of $3 trillion, and falling tax receipts in 2001, Bush contemplated a war that has cost $525 billion dollars \u2013 or $4,681 per household. Imagine if he had gone to the American people to request that. What would have happened? I think we know the answer to that question. And those are government figures; the actual cost of this war will be far higher \u2013 perhaps $20,000 per household.<\/p>\n

***<\/p>\n

If the state has the power and is asked to choose between doing good and waging war, what will it choose? Certainly in the American context, the choice has always been for war.<\/p>\n<\/blockquote>\n

And progressive economics writer Chris Martenson\u00a0explains<\/a>\u00a0as part of his \u201cCrash Course\u201d on economics:<\/p>\n

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If we look at the entire sweep of history, we can make an utterly obvious claim:\u00a0All wars are inflationary. Period. No exceptions.<\/p>\n

***<\/p>\n

So if anybody tries to tell you that you haven\u2019t sacrificed for the war, let them know you sacrificed a large portion of\u00a0your\u00a0savings and\u00a0your\u00a0paycheck to the effort, thank you very much.<\/p>\n<\/blockquote>\n

The bottom line is that war always causes inflation, at least when it is funded through money-printing instead of a pay-as-you-go system of taxes and\/or bonds. It might be great for a handful of defense contractors, but war is\u00a0bad\u00a0for Main Street, stealing wealth from people by making their dollars worth less.<\/p>\n<\/blockquote>\n

Given that John Maynard Keynes and former Federal Reserve chair Ben Bernanke both say thatinflation is a tax on the American people<\/a>, war-induced inflation\u00a0is<\/em>\u00a0a theft of our wealth.<\/p>\n

IEP\u00a0gives<\/a>\u00a0a graphic example \u2014 the Vietnam war helping to push inflation through the roof:<\/p>\n

\"\"<\/a><\/p>\n

War Causes Runaway Debt<\/h3>\n

<\/a>We\u00a0noted<\/a>\u00a0in 2010:<\/p>\n

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All of the spending on unnecessary wars adds up.<\/p>\n

The U.S. is adding trillions to its debt burden to finance its multiple wars in Iraq, Afghanistan, Yemen, etc.<\/p>\n<\/blockquote>\n

Indeed, IEP \u2014 commenting on the war in Afghanistan and Iraq \u2014 notes:<\/p>\n

\n

This was also the\u00a0first time in U.S. history where taxes were cut during a war which then resulted in both wars completely financed by deficit spending<\/strong>. A loose monetary policy was also implemented while interest rates were kept low and banking regulations were relaxed to stimulate the economy. All of these factors have contributed to the U.S. having severe unsustainable structural imbalances in its government finances.<\/p>\n<\/blockquote>\n

We also\u00a0pointed out<\/a>\u00a0in 2010:<\/p>\n

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It is ironic that America\u2019s huge military spending is what made us an empire \u2026 but our huge military is what is bankrupting us \u2026 thus destroying our status as an empire.<\/p>\n<\/blockquote>\n

Economist Michel Chossudovsky told Washington\u2019s Blog:<\/p>\n

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War always causes recession. Well, if it is a very short war, then it may stimulate the economy in the short-run. But if there is not a quick victory and it drags on, then wars always put the nation waging war into a recession and hurt its economy.<\/p>\n<\/blockquote>\n

Indeed, we\u2019ve known for\u00a02,500 years<\/a>\u00a0that prolonged war bankrupts an economy (and remember Greenspan\u2019s\u00a0comment<\/a>.)<\/p>\n

It\u2019s not just civilians saying this \u2026<\/p>\n

The former head of the Joint Chiefs of Staff \u2014 Admiral Mullen \u2014\u00a0agrees<\/a>:<\/p>\n

\n

The Pentagon needs to cut back on spending.<\/strong><\/p>\n

\u201cWe\u2019re going to have to do that if it\u2019s going to survive at all,\u201d Mullen said, \u201cand do it in a way that is predictable.\u201d<\/p>\n<\/blockquote>\n

Indeed, Mullen\u00a0said<\/a>:<\/p>\n

\n

For industry and adequate defense funding to survive \u2026 the two must work together. Otherwise, he added,\u00a0\u201cthis wave of debt\u201d will carry over from year to year, and eventually, the defense budget will be cut just to facilitate the debt.<\/p>\n<\/blockquote>\n

Former Secretary of Defense Robert Gates agrees as well. As David Ignatius\u00a0wrote<\/a>\u00a0in the Washington Post in 2010:<\/p>\n

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After a decade of war and financial crisis, America has run up debts that pose a national security problem, not just an economic one.<\/p>\n

***<\/p>\n

One of the strongest voices arguing for fiscal responsibility as a national security issue has been Defense Secretary Bob Gates. He gave a\u00a0landmark speech in Kansas on May 8, invoking President Dwight Eisenhower\u2019s warnings<\/a>\u00a0about the dangers of an imbalanced military-industrial state.<\/p>\n

\u201cEisenhower was wary of seeing his beloved republic turn into a muscle-bound, garrison state \u2013 militarily strong, but economically stagnant and strategically insolvent,\u201d Gates said. He warned that America was in a \u201cparlous fiscal condition\u201d and that\u00a0the \u201cgusher\u201d of military spending that followed Sept. 11, 2001, must be capped<\/strong>. \u201cWe can\u2019t have a strong military if we have a weak economy,\u201d Gates told reporters who covered the Kansas speech.<\/p>\n

On Thursday\u00a0the defense secretary reiterated his pitch that Congress must stop shoveling money at the military<\/strong>, telling Pentagon reporters: \u201cThe defense budget process should no longer be characterized by \u2018business as usual\u2019 within this building \u2013 or outside of it.\u201d<\/p>\n<\/blockquote>\n

While war might make a handful in the\u00a0military-industrial complex<\/a>\u00a0and\u00a0big banks<\/a>\u00a0rich, America\u2019s top military leaders and economists say that would be a\u00a0very bad<\/em>\u00a0idea for the American people.<\/p>\n

Indeed, military strategists have known for\u00a02,500 years<\/a>\u00a0that prolonged wars are disastrous for the nation.<\/a><\/p>\n

War Increases Terrorism \u2026 And Terrorism Hurts the Economy<\/h3>\n

Security experts \u2014 conservative hawks and liberal doves alike \u2014 agree that waging war in the Middle Eastweakens\u00a0national security and\u00a0increases\u00a0terrorism. See\u00a0this<\/a>,\u00a0this<\/a>,\u00a0this<\/a>,\u00a0this<\/a>,\u00a0this<\/a>,\u00a0this<\/a>\u00a0and\u00a0this<\/a>.<\/p>\n

Terrorism \u2014 in turn \u2014 terrorism is bad for the economy. Specifically, a\u00a0study<\/a>\u00a0by Harvard and the National Bureau of Economic Research (NBER) points out:<\/p>\n

\n

From an economic standpoint, terrorism has been described to have four main effects (see, e.g., US Congress, Joint Economic Committee, 2002). First, the capital stock (human and physical) of a country is reduced as a result of terrorist attacks. Second, the terrorist threat induces higher levels of uncertainty. Third, terrorism promotes increases in counter-terrorism expenditures, drawing resources from productive sectors for use in security. Fourth, terrorism is known to affect negatively specific industries such as tourism.<\/p>\n<\/blockquote>\n

The Harvard\/NBER concludes:<\/p>\n

\n

In accordance with the predictions of the model, higher levels of terrorist risks are associated with lower levels of net foreign direct investment positions, even after controlling for other types of country risks. On average, a standard deviation increase in the terrorist risk is associated with a fall in the net foreign direct investment position of about 5 percent of GDP.<\/p>\n<\/blockquote>\n

So the more unnecessary wars American launches and the more innocent civilians we kill, the less foreign investment in America, the more destruction to our capital stock, the higher the level of uncertainty, the more counter-terrorism expenditures and the less expenditures in more productive sectors, and the greater the hit to tourism and some other industries.\u00a0Moreover<\/a>:<\/p>\n

\n

Terrorism has contributed to a decline in the global economy (for example, European Commission, 2001).<\/p>\n<\/blockquote>\n

So military adventurism increases terrorism which hurts the world economy. And see\u00a0this<\/a>.<\/p>\n

Postscript: Attacking a country which controls the flow of oil has special impacts on the economy. For example, well-known economist Nouriel Roubini says that\u00a0attacking Iran would lead to global recession<\/a>. The IMF says that Iran cutting off oil supplies could\u00a0raise crude prices 30%<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Washington’s Blog Reprinted with permission Top Economists Say War Is Bad for the Economy Preface: Many Americans \u2014 including influential\u00a0economists\u00a0and\u00a0talking heads\u00a0–\u00a0still\u00a0wrongly assume that war is good for the economy. Many\u00a0congressmen\u00a0assume that cutting pork-barrel military spending would hurt their constituents\u2019 jobs. As demonstrated below, it isn\u2019t true. Nobel-prize winning economist Joseph Stiglitz says that\u00a0war is bad […]<\/p>\n","protected":false},"author":1,"featured_media":32435,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-114234","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-latest-news"},"_links":{"self":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/114234","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/comments?post=114234"}],"version-history":[{"count":0,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/114234\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/media\/32435"}],"wp:attachment":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/media?parent=114234"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/categories?post=114234"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/tags?post=114234"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}