Stock markets closed lower today, Thursday, October 11, 2007
The "Little Orphan Annie" comic strip character Daddy Warbucks is still a multi-millionaire, and he recently spoke before Congress in a new incarnation -- young, buzz-cut and handsome. Like death, taxes and the weather, war profiteers are perennial, and little is done about them. And it's useless to pass judgment on war itself; it's such a fixture of human history that some see it as a kind of progress. So, let's assess the popular notion that war is good for the economy.
The "broken window fallacy" originated in a parable about war in an 1850 essay. In brief, a boy breaks a shopkeeper's window, but people gradually decide that the boy is not a vandal; he's a public benefactor who has helped the glazier earn money and then spend it with the baker and shoemaker. The fallacy is that the public considers only the visible benefits of the broken window and not the hidden costs to the shopkeeper. Even worse, sometimes in real life the glazier hires the boy to break the window.
There are three basic ways to fund wars: increase taxes, assume debt, and decrease other spending. Lately, the U.S. is doing at least two of the three, pushing war costs into the future. War funding may benefit segments of the economy -- mostly contractors, suppliers, and some skilled labor -- but the opportunity costs are far greater. Materiel manufacturers make money and spend it in the broader economy, but few count the hidden opportunity costs -- the places that money could have gone instead.
UK-based Oxfam published a report today that shows war is not good for sub-Saharan Africa's economy, which received about $300 billion in aid during the past 15 years and spent all of it on armed conflict.
"The report compares the economies of countries at war with those of countries experiencing peace. According to the report, an average 'war, civil war, or insurgency shrinks an African economy by 15 percent,' and the continent loses about 18 billion U.S. dollars a year to conflict." (UN News Service) The study didn't measure the costs of refugees, rebuilding and other consequences.
The pre-requisite for war is the negative social mood that generates the provocations and reasons for war. Then, we know that the biggest surge in popularity and power any leader ever gets occurs at the onset of a war. When handed that choice, some do not resist.
War can be prevented -- the Cuban Missile Crisis provides one of the classic political science lessons for that. But there are no parades, medals, heroes or celebrations for prevented wars. In the aftermath of prevented war, what we do have left are functional schools, buildings, water systems, health care, roads, bridges and quality of life. Oh, and some people are alive who would have been dead. We seldom think about where the money could have gone and how the lives would have been lived.
Unfortunately, it is unlikely that humans will ever renounce "diplomacy by other means." But we should subject it to critical thought, weigh its costs rationally, and do our best to anticipate it and understand its causes and effects.
If you would like to learn more about the correlations between social mood, the stock market, and war,
click here to watch a free documentary video.
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