The myth of the war economy

[SHRED]

An oldie but a goodie:

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The myth of the war economy
Markets loathe uncertainty and volatility. Conflict brings both

Joseph Stiglitz
Wednesday January 22, 2003
The Guardian

War is widely thought to be linked to economic good times. The 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.

Today, we know that this is nonsense. The 1990s boom showed that peace is economically far better than war. The Gulf war of 1991 demonstrated that wars can actually be bad for an economy. That conflict contributed mightily to the onset of the recession of 1991 (which was probably the key factor in denying the first President Bush re-election in 1992).

The current situation is far more akin to the Gulf war than to wars that may have contributed to economic growth. Indeed, the economic effects of a second war against Iraq would probably be far more adverse. The second world war called for total mobilisation, requiring a country's total resources, and that is what wiped out unemployment. Total war means total employment.

By contrast, the direct costs of a military attack on Saddam Hussein's regime will be minuscule in terms of total US spending. Most analysts put the total costs of the war at less than 0.1% of GDP, the highest at 0.2% of GDP. Much of that, moreover, includes the usage of munitions that already exist, implying that little or no stimulus will be provided to today's economy.

>>>>>>>>>>>> http://www.guardian.co.uk/Iraq/Story/0,2763,879652,00.html

[YDogg]

1. I haven't heard numbnuts refer to himself as the "War President" lately

What up with that, yo?!?

[TheFarseer]

2. I think the war economy myth has BECOME false

because of the changing nature of the war economy. In the 40s, war meant millions of manufacturing jobs. Millions of new manufacturing jobs = an awesome economy. Now what does it mean? No one's building tanks. No one's building ships or aircraft. A few people are making money off military stocks and I imagine regular people like you and me are paying for it somehow. The economy really hasn't changed for anyone (since 2001). The only difference is we are borrowing money and cutting important programs to pay for this disaster.

[Turbineguy]

3. This sentence:

"The Gulf war of 1991 demonstrated that wars can actually be bad for an economy. That conflict contributed mightily to the onset of the recession of 1991 (which was probably the key factor in denying the first President Bush re-election in 1992)."

Is interesting. If we back things up a bit. OK, March 2003. We attack Iraq. Shock and Awe. Capitulation. Surrender. Instant democracy.

Fall to late 2003/ winter 2004 recession in the U.S. George W. not re-elected.

Would this mean that in addition to the lies they used to start this war they lied about their strategy to win it?

[Lasher]

4. War brings deficits

I feel pretty prosperous while I'm maxing out my credit cards. But after that I'm going to be a lot worse off, because the bills have to be paid. It's not always a bad idea to incur debt, but we need to be mindful that there will come a time when we have to pay the piper.

Wartime economies work the same way. We spend a lot of borrowed money to support the war effort, but there is always a reckoning. Of course, you need to increase revenues (higher taxes) to pay those bills unless you're stupid enough to just wreck the whole economy.

[TheFarseer]

5. During WWII, you could raise taxes

and people were damn glad to pay them because millions of people suddenly had jobs manufacturing war stuffs and as soldiers, sailors and pilots. In 2005, there aren't any war related jobs being created. You can't raise taxes without massive grumbling if there aren't new or better jobs or a complete unwillingness to tax the very very few people making money off this war (millionaire Halliburton overlords and such)