The Other I

September 15, 2011

War as the last resort

Filed under: Just Stuff,The Economy: a Neophyte's View,Worries — theotheri @ 4:29 pm

Someone has just pointed out to me that there is a strong argument to be made that war was really the stimulus that finally ended the Great Depression.

The implications are worrisome to say the least.

  • When a country is being attacked, nobody worries about the size of the deficit when a country is at war.  They even buy bonds to finance government spending.
  • Nobody worries about the sacrifices they are making, or goes out on strike because their pensions might not be big enough in 20 or 30 years.
  • And the chances that a country will go to war are much greater when people are threatened, when they are jobless, without hope, and unable to get enough to food, water, or shelter.
  •  Opposing political parties in Congress or Parliaments unite in a wild patriotic frenzy to support the war effort.

50 million people died during World War II.  But it did end the Great Depression, and usher in a period of unprecedented prosperity in many parts of the world, not least in the United States.

I hope we can find a better way out of the world’s economic morass this time.

 

 

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4 Comments »

  1. Like, living within our means?

    Like

    Comment by sanstorm — September 15, 2011 @ 5:12 pm | Reply

    • Well, a lot of people in the Republican Right in America agree with you — people should just stop spending money they don’t have and should stop depending on the state to solve their problems for them. Actually, much as I approve of living within our means, I see two problems with this method to stimulate the economy.

      The first is the problem of millions of unemployed or under-employed who can’t get a job, not because they are unwilling to work but because the jobs aren’t there. For this group, “living within ones means” is sometimes simply impossible to achieve, especially when one’s unemployment payments stop, which is much sooner in the States than in Britain. So even if living on the dole actually contributed to the economy, they can’t achieve even that.

      The second problem is that history does not suggest that living within ones means actually stimulates the economy. What John Keynes pointed out is that the government is the spender of last resort, which can create jobs by spending money on things like infrastructure and education. It’s what ended the Great Depression in the States and ultimately the world- whether it was spending by Roosevelt’s New Deal or by World War II is debatable.

      And that is why it is quite possible that war is the Stimulator of Last Resort. What makes it particularly scary is that citizens supporting their governments’ going to war aren’t going to say it is to stimulate the economy. What will happen is that they will feel threatened and discriminated against and hostile, and so will support kicking out at both real and supposed enemies in this way. They will not be in the mood to support political negotiations or economic sanctions. As the US response to 9/11 suggests, the desire to “kick ass” (as President Bush put it) may be even greater than the desire to maintain our security which could certainly have been done without invading Iraq and probably Afghanistan.

      Like

      Comment by Terry Sissons — September 16, 2011 @ 11:50 am | Reply

  2. I remember pre-2008 always having an uneasy feeling when there were all those loan ads on the TV – and I used to think to myself “surely this can’t go on forever”. I thought it was just that I didn’t understand money (I really don’t) but it turned out I was right. All the shooting house prices and easy credit was papering massively over cracks in reality. So that’s my “live with our means” thing. In my grandparents day, they’d never have bought anything on credit. They’d have the money first, then buy.
    But, for those with means, they need to be less risk averse. (Ironic, as I am totally risk averse). The haves need to use their imagination to employ the not-haves, so they can be haves too.
    Micro-finance is also an option (not in Britain though, with the benefit trap) for smaller scale entrepreneurs.
    War has got to be the worst way out of a recession. Very Orwell.

    Like

    Comment by sanstorm — September 16, 2011 @ 7:05 pm | Reply

    • Ah, I see what you were getting at, and I don’t disagree. I’m not against credit if one can afford it. The housing market for all but the excessively wealthy or those who inherit a house would be completely inaccessible without a mortgage. And in relation to the sub-prime mortgage debacle, I’m much more inclined to blame the banks than the individual buyers. They were often led to believe they could afford it. And besides they were assured by “experts” that the housing market was unlikely ever to collapse.

      Off to vent further on my blog post for the day.

      Like

      Comment by Terry Sissons — September 16, 2011 @ 7:18 pm | Reply


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