(Another) Idiot Economist Says We Need "Major War" to Save the Economy

George Washington's picture

Preface: Two weeks ago, well-known economist Tyler Cowen (a professor at George Mason University) argued in the New York Times that wars – especially “major wars” -  are good for the economy.

Cowen joins extremely influential economists like Paul Krugman and Martin Feldstein – and various talking heads – in promoting this idea.

Also, many congressmen assume that cutting pork-barrel military spending would hurt their constituents’ jobs.

It is vital for policy-makers, economists and the public to have access to a definitive analysis to determine once and for all whether war is good or bad for the economy.

That analysis is below.

Top Economists Say War Is Bad for the Economy

Nobel-prize winning economist Joseph Stiglitz says that war is bad for the economy:

Stiglitz wrote in 2003:

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.

Stiglitz has also said that this decade’s Iraq war has been very bad for the economy. See this, this and this.

Former Federal Reserve chairman Alan Greenspan also said in that war is bad for the economy. In 1991, Greenspan said that a prolonged conflict in the Middle East would hurt the economy. And he made this point again in 1999:

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’s list: “The freeing up of resources previously employed to produce military products that was brought about by the end of the Cold War.” Are you saying, Frank asked, “that dollar for dollar, military products are there as insurance … and to the extent you could put those dollars into other areas, maybe education and job trainings, maybe into transportation … that is going to have a good economic effect?” Greenspan agreed.

Economist Dean Baker notes:

It is often believed that wars and military spending increases are good for the economy. In fact, most economic models show that military spending diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment.

Professor Emeritus of International Relations at the American University Joshua Goldstein notes:

Recurring war has drained wealth, disrupted markets, and depressed economic growth.




War generally impedes economic development and undermines prosperity.

And David R. Henderson – associate professor of economics at the Naval Postgraduate School in Monterey, California and previously a senior economist with President Reagan’s Council of Economic Advisers – writes:

Is military conflict really good for the economy of the country that engages in it? Basic economics answers a resounding “no.”

The Proof Is In the Pudding

Mike Lofgren notes:

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. [Indeed, WWII was different from current wars in many ways, and so its economic effects are not comparable to 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.




During the decade of the 2000s, DOD budgets, including funds spent on the war, doubled in our nation’s longest sustained post-World War II defense increase. Yet during the same decade, jobs were created at the slowest rate since the Hoover administration. If defense helped the economy, it is not evident. And just the wars in Iraq and Afghanistan added over $1.4 trillion to deficits, according to the Congressional Research Service. Whether the wars were “worth it” or merely stirred up a hornet’s 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.

The Washington Post noted in 2008:

A recent paper from the National Bureau of Economic Research concludes that countries with high military expenditures during World War II showed strong economic growth following the war, but says this growth can be credited more to population growth than war spending. The paper finds that war spending had only minimal effects on per-capita economic activity.




A historical survey of the U.S. economy from the U.S. State Department reports the Vietnam War had a mixed economic impact. The first Gulf War typically meets criticism for having pushed the United States toward a 1991 recession.

The Institute for Economics & Peace (IEP) shows that 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 below the baseline trend:

IEP notes:

By examining the state of the economy at each of the major conflict periods since World War II, it can be seen that the positive effects of increased military spending were outweighed by longer term unintended negative macroeconomic consequences. 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 higher inflation, budget deficits, high taxes and reductions in consumption or investment. Rectifying these effects has required subsequent painful adjustments which 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, if 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. The crowding-out effects of disproportionate government spending on military functions can affect service delivery or infrastructure development, ultimately affecting long-term growth rates.




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, taxpayers have been burdened, and private sector consumption and investment have been constrained as a result. Other negative effects include larger budget deficits, higher taxes, and growth above trend leading to inflation pressure. These effects can run concurrent with major conflict or via lagging effects into the future. Regardless of the way a war is financed, the overall macroeconomic effect on the economy tends to be negative. 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 taxes would have been lower, inflation would have been lower, there would have been higher consumption and investment and certainly lower budget deficits. 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.

We noted in 2011:

This is a no-brainer, if you think about it. We’ve been in Afghanistan for almost twice as long as World War II. We’ve been in Iraq for years longer than WWII. We’ve been involved in 7 or 8 wars in the last decade. And yet [the economy is still unstable]. If wars really helped the economy, don’t you think things would have improved by now? Indeed, the Iraq war alone could end up costing more than World War II. And given the other wars we’ve been involved in this decade, I believe that the total price tag for the so-called “War on Terror” will definitely support that of the “Greatest War”.

Let’s look at the adverse effects of war in more detail …

War Spending Diverts Stimulus Away from the Real Civilian Economy

IEP notes that – even though the government spending soared – consumption and investment were flat during the Vietnam war:

The New Republic noted in 2009:

Conservative Harvard economist Robert Barro has argued that increased military spending during WWII actually depressed other parts of the economy.

(New Republic also points out that 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.)

How could war actually hurt the economy, when so many say that it stimulates the economy?

Because of what economists call the “broken window fallacy”.

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 – if the window hadn’t been broken – the shop-owner would have spent that money on other things, such as food, clothing, health care, consumer electronics or recreation, which would have helped the economy as much or more.

If the shop-owner hadn’t 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 other sectors of the economy. Indeed, all of the military spending has just created military jobs, at the expense of the civilian economy.

Professor Henderson writes:

Money not spent on the military could be spent elsewhere.This also applies to human resources. The more than 200,000 U.S. military personnel in Iraq and Afghanistan could be doing something valuable at home.


Why is this hard to understand? The first reason is a point 19th-century French economic journalist Frederic Bastiat made in his essay, “What Is Seen and What Is Not Seen.” Everyone can see that soldiers are employed. But we cannot see the jobs and the other creative pursuits they could be engaged in were they not in the military.


The second reason is that when economic times are tough and unemployment is high, it’s easy to assume that other jobs could not exist. But they can. This gets to an argument Bastiat made in discussing demobilization of French soldiers after Napoleon’s downfall. He pointed out that when government cuts the size of the military, it frees up not only manpower but also money. The money that would have gone to pay soldiers can instead be used to hire them as civilian workers. That can happen in three ways, either individually or in combination: (1) a tax cut; (2) a reduction in the deficit; or (3) an increase in other government spending.




Most people still believe that World War II ended the Great Depression …. But look deeper.




The government-spending component of GNP went for guns, trucks, airplanes, tanks, gasoline, ships, uniforms, parachutes, and labor. What do these things have in common? Almost all of them were destroyed. Not just these goods but also the military’s billions of labor hours were used up without creating value to consumers. Much of the capital and labor used to make the hundreds of thousands of trucks and jeeps and the tens of thousands of tanks and airplanes would otherwise have been producing cars and trucks for the domestic economy. The assembly lines in Detroit, which had churned out 3.6 million cars in 1941, were retooled to produce the vehicles of war. From late 1942 to 1945, production of civilian cars was essentially shut down.


And that’s just one example. Women went without nylon stockings so that factories could produce parachutes. Civilians faced tight rationing of gasoline so that U.S. bombers could fly over Germany. People went without meat so that U.S. soldiers could be fed. And so on.


These resources helped win the war—no small issue. But the war was not a stimulus program, either in its intentions or in its effects, and it was not necessary for pulling the U.S. out of the Great Depression. Had World War II never taken place, millions of cars would have been produced; people would have been able to travel much more widely; and there would have been no rationing. In short, by the standard measures, Americans would have been much more prosperous.


Today, the vast majority of us are richer than even the most affluent people back then. But despite this prosperity, one thing has not changed: war is bad for our economy. The $150 billion that the government spends annually on wars in Iraq and Afghanistan (and, increasingly, Pakistan) could instead be used to cut taxes or cut the deficit. By ending its ongoing warsthe U.S. governmentwould be developing a more prosperous economy.

Austrian economist Ludwig Von Mises points:

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.

We noted in 2010:

You know about America’s unemployment problem. You may have even heard that the U.S. may very well have suffered a permanent destruction of jobs.


But did you know that the defense employment sector is booming?


[P]ublic sector spending – and mainly defense spending – has accounted for virtually all of the new job creation in the past 10 years:

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:

Private sector job growth was almost non-existent over the past ten years. Take a look at this horrifying chart:


longjobs1 The Military Industrial Complex is Ruining the Economy


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.


It’s 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:


longjobs2 The Military Industrial Complex is Ruining the Economy


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.


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.




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.

Let me finish with a final chart.


longjobs4 The Military Industrial Complex is Ruining the Economy


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. [120]



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.

And this shows military versus non-military durable goods shipments: us collapse 18 11 The Military Industrial Complex is Ruining the Economy [Click here to view full image.]


So we’re running up our debt (which will eventually decrease economic growth), but the only jobs we’re creating are military and other public sector jobs.


PhD economist Dean Baker points out that America’s massive military spending on unnecessary and unpopular wars lowers economic growth and increases unemployment:

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.

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.


Global Insight’s 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.


The scenario we asked Global Insight [recognized as the most consistently accurate forecasting 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…


The projected job loss from this increase in defense spending would be close to 2 million. In 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.

The Political Economy Research Institute at the University of Massachusetts, Amherst has also shown that non-military spending creates more jobs than military spending.

High Military Spending Drains Innovation, Investment and Manufacturing Strength from the Civilian Economy

Chalmers Johnson notes that high military spending diverts innovation and manufacturing capacity from the economy:

By the 1960s it was becoming apparent that turning over the nation’s 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 observes that, 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.




Woods writes: “According 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’s plant and equipment, and infrastructure, at just over $7.29 trillion… The amount spent over that period could have doubled the American capital stock or modernized and replaced its existing stock”.


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, our manufacturing base had all but evaporated. Machine tools, an industry on which Melman was an authority, are a particularly important symptom. In November 1968, a five-year inventory disclosed “that 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’ 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 continuous debilitating and depleting effect that the military use of capital and research and development talent has had on American industry.”

Economist Robert Higgs makes the same point about World War II:

Yes, officially measured GDP soared during the war. Examination of that increased output shows, however, that it consisted entirely of military goods and services. Real 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. Some prosperity. (My article in the peer-reviewed Journal of Economic History, March 1992, presents many of the relevant details.)


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. As Ludwig von Mises wrote in the aftermath of World War I, “war prosperity is like the prosperity that an earthquake or a plague brings.”

War Causes Austerity

Economic historian Julian Adorney argues:

Hitler’s rearmament program was military Keynesianism on a vast scale. Hermann Goering, Hitler’s economic administrator, poured every available resource into making planes, tanks, and guns. In 1933 German military spending was 750 million Reichsmarks. By 1938 it had risen to 17 billion with 21 percent of GDP was taken up by military spending. Government spending all told was 35 percent of Germany’s GDP.




No-one could say that Hitler’s rearmament program was too small. Economists expected it to create a multiplier effect and jump-start a flagging economy. Instead, it produced military wealth while private citizens starved.




The people routinely suffered shortages. Civilian wood and iron were rationed. Small businesses, from artisans to carpenters to cobblers, went under. Citizens could barely buy pork, and buying fat to make a luxury like a cake was impossible. Rationing and long lines at the central supply depots the Nazis installed became the norm.


Nazi Germany proves that curing unemployment should not be an end in itself.

War Causes Inflation … Which Keynes and Bernanke Admit Taxes Consumers

As we noted in 2010, war causes inflation … which hurts consumers:

Liberal economist James Galbraith wrote in 2004:

Inflation applies the law of the jungle to war finance. Prices and profits rise, wages and their purchasing power fall. Thugs, 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 “inflation tax” — meaning that the government runs a big deficit in nominal terms, but a smaller one when inflation is factored in.




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. Gas prices can go up when refining capacity becomes short — due partly to too many mergers. More generally, when sales to consumers are slow, businesses ought to cut prices — but many of them don’t. Instead, they raise prices to meet their income targets and hope that the market won’t collapse.

Ron Paul agreed in 2007:

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. In 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.


The result of this arrangement is inflation. And inflation finances war.

Blanchard Economic Research pointed out in 2001:

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




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 … finds that … periods 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.




Other economists agree with Professor Fischer’s link between inflation and war.


James Grant, the respected editor of Grant’s 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:

“War is inflationary. It 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.”

Libertarian economics writer Lew Rockwell noted in 2008:

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: the Fed is the institution that has created the money to fund the wars. In this role, it has solved a major problem that the state has confronted for all of human history. A 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.




Reflecting on the calamity of this war, Ludwig von Mises wrote in 1919

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.***

In the entire run-up to war, George 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. But he didn’t 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 — 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 — perhaps $20,000 per household.




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.

And progressive economics writer Chris Martenson explains as part of his “Crash Course” on economics:

If we look at the entire sweep of history, we can make an utterly obvious claim: All wars are inflationary. Period. No exceptions.




So if anybody tries to tell you that you haven’t sacrificed for the war, let them know you sacrificed a large portion of your savings and your paycheck to the effort, thank you very much.

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 bad for Main Street, stealing wealth from people by making their dollars worth less.

Given that John Maynard Keynes and former Federal Reserve chair Ben Bernanke both say that inflation is a tax on the American people, war-induced inflation is a theft of our wealth.

IEP gives a graphic example – the Vietnam war helping to push inflation through the roof:

War Causes Runaway Debt

We noted in 2010:

All of the spending on unnecessary wars adds up.


The U.S. is adding trillions to its debt burden to finance its multiple wars in Iraq, Afghanistan, Yemen, etc.

Indeed, IEP – commenting on the war in Afghanistan and Iraq – notes:

This was also the first time in U.S. history where taxes were cut during a war which then resulted in both wars completely financed by deficit spending. 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.

We also pointed out in 2010:

It is ironic that America’s huge military spending is what made us an empire … but our huge military is what is bankrupting us … thus destroying our status as an empire.

Economist Michel Chossudovsky told Washington’s Blog:

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.

Indeed, we’ve known for 2,500 years that prolonged war bankrupts an economy (and remember Greenspan’s comment.)

It’s not just civilians saying this …

The former head of the Joint Chiefs of Staff – Admiral Mullen – agrees:

The Pentagon needs to cut back on spending.


“We’re going to have to do that if it’s going to survive at all,” Mullen said, “and do it in a way that is predictable.”

Indeed, Mullen said:

For industry and adequate defense funding to survive … the two must work together. Otherwise, he added, “this wave of debt” will carry over from year to year, and eventually, the defense budget will be cut just to facilitate the debt.

Former Secretary of Defense Robert Gates agrees as well. As David Ignatius wrote in the Washington Post in 2010:

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




One of the strongest voices arguing for fiscal responsibility as a national security issue has been Defense Secretary Bob Gates. He gave a landmark speech in Kansas on May 8, invoking President Dwight Eisenhower’s warnings about the dangers of an imbalanced military-industrial state.


“Eisenhower was wary of seeing his beloved republic turn into a muscle-bound, garrison state — militarily strong, but economically stagnant and strategically insolvent,” Gates said. He warned that America was in a “parlous fiscal condition” and that the “gusher” of military spending that followed Sept. 11, 2001, must be capped. “We can’t have a strong military if we have a weak economy,” Gates told reporters who covered the Kansas speech.


On Thursday the defense secretary reiterated his pitch that Congress must stop shoveling money at the military, telling Pentagon reporters: “The defense budget process should no longer be characterized by ‘business as usual’ within this building — or outside of it.”

While war might make a handful in the military-industrial complex and big banks rich, America’s top military leaders and economists say that would be a very bad idea for the American people.

Indeed, military strategists have known for 2,500 years that prolonged wars are disastrous for the nation.

War Increases Terrorism … And Terrorism Hurts the Economy

Security experts – conservative hawks and liberal doves alike – agree that waging war in the Middle East weakens national security and increases terrorism. See this, this, this, this, this, this and this.

Terrorism – in turn – terrorism is bad for the economy. Specifically, a study by Harvard and the National Bureau of Economic Research (NBER) points out:

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.

The Harvard/NBER concludes:

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.

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. Moreover:

Terrorism has contributed to a decline in the global economy (for example, European Commission, 2001).

So military adventurism increases terrorism which hurts the world economy. And see this.

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 attacking Iran would lead to global recession. The IMF says that Iran cutting off oil supplies could raise crude prices 30%.

War Causes Us to Lose Friends … And Influence

While World War II – the last “good war” – may have gained us friends, launching military aggression is now losing America friends, influence and prosperity.

For example, the U.S. has launched Cold War 2.0 – casting Russia and China as evil empires – and threatening them in numerous way. For example, the U.S. broke its promise not to encircle Russia, and is using Ukraine to threaten Russia; and the U.S. is backing Japan in a hot dispute over remote islands, and backing Vietnam in its confrontations with China.

And U.S. statements that any country that challenge U.S. military – or even economic – hegemony will be attacked are extremely provocative.

This is causing Russia to launch a policy of “de-dollarization”, which China is joining in. This could lead to the collapse of the petrodollar … which would wreck the U.S. economy.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
gregga777's picture

Economics is often and quite properly described as "a dismal science". Of course, Economics isn't a science at all. For instance, it has no way to measure the costs associated with using up irreplaceable natural resources. Economics can't even describe how our current civilization could not exist without fossil fuels.

I saw little mention in this very lengthy post on those who experience the greatest suffering during wars and often die the most, especially in industrialized 'total war': civilians and their loss to the future and the costs of those deaths.

Little was also mentioned about the costs of taking care of wounded veterans for the rest of their life and their loss of personal potential. The last I recall showed these costs at some $25 billion per year, though I am confident that is a gross understatement of the true costs. I do not know any disabled veteran who happy being disabled and cared for by the Veterans Administration. I would much rather be whole in mind and body and working for a living than living off the largesse of an indifferent bureaucracy and nation.

The Federal Reserve Act of 1913 is Unconstitutional. It created the Federal Reserve Bank and circumvented one of the key constraints the Founders place on the Federal government: the requirement to raise taxes to pay for wars in Constitutionally sound money. To protest an unpopular war the people could withdraw their silver from the banks, hoard it and deny the Federal government of money to pay for the war.

The Constitution gives the Congress the responsibility to COIN MONEY and to regulate the value thereof. It doesn't say print money. It says to COIN MONEY, with the Dollar defined by the 1792 Coinage Act as 371.25 grains of our silver. Therefore, Federal Reserve Notes, and all debts based on them, are Unconstitutional. Our entire National Debt is an "onerous" debt that we are not responsible for because it circumvents the Constitution.

JoJoJo's picture

Were there Ziist bankers and media types clamoring for both WW I and WW II ?  They almost convinced us that Putin was Hitler.Oops that didn't work

q99x2's picture

Replace the Federal Government with Open Source Software.

GoldIsMoney's picture

It is ridicilous to write from good things in war. The sense of war is destruction and destruction is destroying things. So anyone wrting about economy and war and stating war is good for an economy is just stupid (and that's the nicest word which covers this madness)

BanjoDoug's picture

Almost ALL "COWAN"s are Jews,  I'm sure this is no exception......  & frankly my 4th of July American Values is tired of spilling gentile American blood for Jewish Bankster wealth projects.....

jack stephan's picture

War here war there, still screaming projectiles narrowly missing anyways. I usually don't get self righteous, polite but distant. But this is just focus in the first 20 feet here, you don't need combat in bakalakadakastan. It's here already, and we had enough, especially myself. It's war from most of your life for a lot on here, has been since way back. Coordinates aside.

These cock blowers need real problems. And if this goes on they might just get the violence they put so high on a pedestal.

It's easy to send some idealistic kid to do your dirty work, but far too stinky pussy to ever get their own hands dirty, no matter how much tuffy talk.

So from me to your quasi fascist whatever works and everyone is expendable to cover your "Mack truck size" butthole, and your mommy and soros daddy drink my beer piss. America has enough problems and doesn't need any more.

Shit I can get smoked just getting a beer, with the hoods around, filling my tire and I get snuck up on.


That guy with the unpronounceable name started this James Bond villain shit, starts with a z and his last name starts with a b

Left bad right good, they are the same. Paid by the same 6 media crews. Same investment firms, republicans are just slower supposedly.

Cruz wife is a Vice President of gs, as I heard. What the fuck else can I say.

Vendetta's picture

no sense talking about trade policy but war... yeah that's the ticket to prosperity

MrBoompi's picture

If we treated hunger, poverty, sickness, unemployment, and misery as if it was a war we might be able to accomplish something. But The Powers That Be love conventional war because of the money that can be made from selling weapons, from rebuilding what was destroyed, and the many resources that can confiscated from the losers. An added bonus is there are less mouths to feed.

windcatcher's picture


Independence Day 2014:


Be sure to fly the United States of America flag upside down, in flag etiquette, an upside down flag is considered a “distress” signal.


The American People are under attack and in “distress” today on many fronts (our democracy has been overthrown and our Free Enterprise System of capitalism economy has been destroyed) by the same criminals that successfully carried out the “inside job” attacks on 9/11/01. The American People have been under attack for 13 years!!!


Illegal immigration is just another fascist bankster/ big oil/ military complex/drugs criminal cartel orchestrated attack to destroy American Sovereignty (independence) with secret and illegal trade agreements and UN Agenda 21st Century.


luckylongshot's picture

War is good for banksters, everyone else loses.

MFL8240's picture

Can we send him and his whole family to fight it?  Of course not, just poor people and idits will to have their legs taken off in the name of bankers and big oil!  Fuck You asshole!

Ban KKiller's picture

If you had your own decentralized power and food do you need war? 

Death, by law, to Banksters and their scumbag attorneys.

Itinerant's picture

What a long post.

Can I sum things up by saying that destroying buildings and killing people is the opposite of putting them up and keeping people alive?

Of course there is money to be made in wartime. Looting can also a way to get richer ... but obviously not in aggregate.

There are only two economic benefits of war:

1. Massive investments in technology (in the hopes of not being extinguished), which often have benefits in peacetime

2. Massive redistribution of ownership of all kinds of assets.

But note that both of these could easily be organized without war ... war simply provides the motivation and impetus. In peacetime it is also possible to invest massively in productive capital (at the cost of consumption) and to write off debt/wealth-claims and redistribute assets more evenly. With what motivation? TO AVOID WAR & STRIFE?


Blizzard_Esq's picture


Disenchanted's picture

I'll bet we can find these economist warmonger cunts some rifles and C-Rations.

Off ye go laddies, remember the difference between your rifle and your gun.

Antifaschistische's picture

If blowing stuff up is good for the economy at a macro level..

Then why do we have to go to war to do it....wars are very expensive, aircraft carriers are very expensive, tomahawk missles are very expensive, etc.

We can just start blowing stuff up here with good old fashioned dynamite.

I recommend this government stimulus program start with dynamiting (evacuated) IRS offices, then move on to BLM, EPA, DOE, OSHA, HHS, CPS etc.

mastersnark's picture

From whence come wars and fightings among you? come they not hence, even of your lusts that war in your members? Ye lust, and have not: ye kill, and desire to have, and cannot obtain: ye fight and war, yet ye have not, because ye ask not. James 4:1-2

Everyone is lying's picture

Stock tip:


Go long on Soylent Green production in the near term.


You'll make a killing.


Do you honestly think that Dick Cheney, Paul Wolfowitz, and Donald Rumsfeld actually give a hoot if the USA economy finds itself in the shitter? These warmongers made profits
that you paid for and I don't see them giving their profits back in the near future. Clearly, the American public [read
useful idiots] will go along with whatever they force you to go along with and there is not a God damn thing you can do about it unless they are standing right in front of you.
Try getting access to these warmongers and see if the state does not stand in your way!

p.s. Donald 'Rummy' Rumsfeld publicly disclosed that there was $1.3 Trillion USD petro-dollars that were lost during the Iraq war and he stated that the Pentagon accounting office did not know where those petro-dollars went missing?

p.s.2.....try checking the CFR bank accounts or Israel's
coffers, American DEBT slaves!

sgt_doom's picture

I agree with your sentiments, MOU!

Certainly, I applaud the vast majority of the blog postings of GW, but the timber of this one is perhaps a bit off.

Sure, bank lobbyists such as Paul Krugman ("banks don't create credit" --- "the top banks are healthy" --- "the global meltdown was due to American household debt" --- and, "the rise in oil prices in 2008 was simple supply and demand") agree with such stupidity, as does professional fraudster, Martin Feldstein (director, HCA when they were hit with the largest out-of-court criminal penalties in history for Medicare/Medicaid fraud --- director, Eli Lilly, when they were hit with the largest criminal penalty in US history for fraudulently marketing a drug that killed --- director, AIG Financial Products, when they were involved in the largest insurance swindles in human history), but Tyler Cowen, a director at the Mercatus Center (Koch brothers financed and staffed), I mean one should never stoop so low as to even mention that stooge's name, fer crissakes!


Cowen also serves as general director of George Mason's

Mercatus Center, a university research center that focuses on the market economy.






blindman's picture

" today, everyone believes/recognizes that you have to destroy
civilization to save it. " worms for brains

Farqued Up's picture

Al Capp and his fearless high sheriff, Fearless Fosdick, shoot them before they can eat the poison beans.

Brilliant satirist. From L'il Abner comic strip years ago.

Flying Wombat's picture

The face of war:

‘Thanks, Ukraine Air Force’: Bombarded villagers accuse Kiev of killing civilians (warning:  graphic video)


The Phallic Crusader's picture

economists confuse the map with the territory, but one wonders why they also don't think of equally wasteful miallocations that dont kill lots of people - like building a bridge between alaska and siberia, or creating a Scarlett Johannson {sp?} clone army and having it fuck its way across Asia.

Shit like that.

rwe2late's picture


destroys the environment DOMESTIC AND FOREIGN

The global military is the biggest consumer of petroleum products (thus making a self-serving self-fulfilling "security" need for petroleum wars, pollution, and unsavory alliances). The military and the military industry are also the world's worst polluters, from petroleum products, nuclear, chemical, biological, and direct environmental destruction.

creates long-term physical and mental health problems DOMESTIC AND FOREIGN

Participation in overt and covert brutalities, injuries, exposure to toxins, deprivations, displacements, subjected to bigoted propaganda, and social fragmentation

VWAndy's picture

Bat shit crazy. Brazenly false logic. Moraly and ethicaly bankrupt.

 These puke stains went to college dropped a bunch of lsd and now they think they have it all figured out?


sondernauch's picture

The next war should be fought without any modern weapons. Only knives, spears, bows and arrows, maces, etc., fought on foot, horseback, or from wooden boats. Kinda like what goes on between football games, except not as vicious.

khaproperty's picture

What is to be need: a veritable crash to pay for the lunch - which never was and will be free.

And a new start without so much cronyism as we still see all over the world.

JRobby's picture

War makes BIG $$$$ for insiders. Therefore, we will have more wars.

911 really showed their hand. Brand new department of government created where the spending is hidden from the public as a matter of "homeland security". Plus 2 new wars and no new taxes. Too bad the banksters did not tell them tax revenues would go off a cliff in 2008.......................

It is amazing how many different ways they print for the "club members"

sam site's picture


Few realize Roosevelt made a deal with Churchill to have the dollar replace the pound as the global trade currency if Roosevelt would enter the US into WW2.  Roosevelt set up Pearl Harbor to get us into the war at a time when the Japs were appealing to US diplomats to form an alliance - not to be enemies as we are led to believe.

Roosevelt understood that with the global trade status for the dollar after WW2, it would give him an opportunity to counterfeit the dollar globally and hide the bodies (counterfeited dollars) all over the world, thereby exporting our inflation as we've been doing since WW2. 

The public attributes American exceptionalism to our being vastly more productive and smarter that our foreign competitors, when our post WW2 advantage mostly resulted from our Fed global counterfeiting scheme.  Just as today another advantage is the skimming racket known as the Petrodollar in exchange for an OPEC protection racket using DOD assets.

As the saying goes "Behind every great fortune is a great crime" also applies globally as the US jumps from one scam or racket to the next to keep us one step ahead of our global competitors.  What do you expect from a country that was captured in 1913 by the Fed and is run from behind the scenes by organized crime masquerading as a Jesuit religious order.

Since 1933, when King Roosevelt forbade US citizens from redeeming dollars for gold, he further took the US off a gold standard.  In 1945 only 17% of dollars in circulation were backed by gold. 

Unfortunately, countries could still redeem their dollars for gold and France, suspecting we were massively counterfeiting, as were were, started redeeming their dollars for gold in 1965 and that led to Nixon closing the gold window in 1971 as our bluff was called and the US was exposed as massively counterfeiting the global dollar.

If one didn't understand the Jesuit conspiracies that have been driving history since it's founding in 1540, one would naturally believe wars promote wealth.  Since 1913, the Jesuit owners of the Fed, have steadily reduced the dollars gold backing, that has enabled massive counterfeiting and global fraud.  The Fed is finally cornered by an increasingly more angry global community that has been observing our global dollar scams.

We're coming up to the end of the final and seventh stage of the dollar fiat currency and is about to reset to stage one of gold & silver genuine money as economist Mike Maloney describes.  I believe with the internet, the need for a single reserve currency will become obsolete and many currencies will be convertable - much as China has done with their bi-lateral swap agreements between over 23 countries. 

A middleman or reserve currency will no longer be necessary and with it eliminates the opportunity to globally counterfeit as our organized crime Jesuit Fed rulers has done since 1913.  A far healthier and honest world is ahead of us, without wars and depressions, because of this extraordinary technological advance. 

Man is about to finally dispell the control of Jesuit organized crime over our world and we will finally realize that man is not aggressive and perpetually starts wars.  We're also about to realize that we have far more control over our health than our Jesuit rulers have led us to believe. 

Disease does not strike randomly and genes don't determine our fate.  This is to throw us off the trail that we're being systematically poisoned by our hidden Jesuit rulers in order to dominate us just as Hitler added fluoride to concentration camp drinking water to disable prisoner health and better control them.  A new age has arrived if enough people use and are awakened by this extraordinary web communication.  

There was once a contest in the 90s for the greatest invention of all time and the Guttenburg press won the prize.  But books are far more vulnerable to suppression than the web.  The Jesuits were able to suppress and destroy over 6000 seperate books warning the world of their evil plots of secret domination.  They are going to have a much harder time doing that on the web.

see this video on suppressed Jesuit history




Mike Ochisbent's picture

WJHTBJ. Je(w)suits. Fixed it. Not a Scottish name to be found.

The Phallic Crusader's picture

You think Jesuits own the Fed, do you? An order of around 3000 mostly old, mostly loony left liberal men owns the federal reserve banks...

I mean, are you a genuine fucking idiot, or just a troll like Karen Hude hoping to distract everyone from who the real owners are?

Or just some southern Protestant Fuck who thinks it's 16th century europe and you're all sore about the "Papists.?

Get thee to the John Hagee website!

papaswamp's picture

Major war would be helpful, but not for the reasons stated...most likely for the reasons that no one wants to mention. Death. Humans have negated or minimized the impact of many of natures population checks and balances. Conflict over resources though is one that is hard to prevent. The planet has finite resources and they are running low, much quicker than many wish to state.
Population decline ( though already occurring in many places) will solve a huge number of issues from jobs to resource decline. Im not talking a few 100,000 in a 3rd world country, but rather global conflict where several million are lost and present economic systems collapse. We need a reboot.

This may sound harsh, but it is reality, and is the only way to solve present issues as well as some future ones. Of course, off world expansion would be another, but I dont see governments willing to make that investment.

Marley's picture

Most Anarchical-Capitalist love war, as long as others do the dying while they get the money.  Draft from the highest income to the lowest.  From the religious to non-religious.  Result would be no wars.

crazytechnician's picture

Bullshit the Anarcho-Capitalist love technology , humanity and increase in standard of living and wealth for all people. If true Capitalism reigned over this planet instead of Crony Capitalism building bombs and missilies and killing people left right and centre we would now be building space gateways and getting our materials from mining asteroids and our closest planets. Instead we have Kenzian Krugmanites and Central Banking cunts - worshippers of printed cash debt / fake wealth who create wars to facilitate their bullshit slave crony system. If we had true Capitalism we would now be building interplanetary slingshots and would have multiple off earth colonies - these fucks would actually be even better off , they think they are intelligent but they are in reality the Philistines of our age.

Emergency Ward's picture

The warmongering economists (Krugman, etc) mentioned in the article most certainly think of themselves as socialist progressives.  Peace and war are just two points on a graph to them.  A nuclear war is a "boom".

TeethVillage88s's picture

Mercenary / Private Military Companies (PMCs)

ACS Defense
AD Consultancy (UK)
Aegis Defence Services Ltd
AKE Limited (UK)
AirScan (US)
Alpha Five (Hong Kong)
AMA Associates Ltd [UK]
ArmorGroup (UK)
Beni Tal [Israel]
Blackwater Security Company (US)
Combat Force (South Africa)
Combat Support Associates
Control Risks Group
Corporate Trading Intl (Hong Kong)
Cubic Defense Applications
Custer Battles (US)
Defence Systems Ltd. (UK)
Diligence Middle East (US)
DynCorp International(US)
Erinys Iraq Limited
Executive Outcomes (South Africa) defunct
Genric (UK)
Global Development Four
Global Marine Security Systems Company
Global Risk International
Global Risk Strategies (UK)
Group 4 Falck A/S (India)
Gurkha Security Guards (Isle of Man, UK)
Halliburton [KBR Engineering & Construction]
Hill and Associates, Ltd. (Hong Kong)
Honey Badger Arms and Ammo (South Africa)
ICI of Oregon
ICP Group Ltd (UK)
ISI Group
Investments Surveys (South Africa)
Jardine Securicor Gurkha Services (Hong Kong)
Joseph Patrick International
Kas Enterprises (South Africa)
Longreach Security (South Africa)
Main Street Supply
Meteoric Tactical Solutions (South Africa)
Meyer & Associates (US)
Military Professional Resources Inc. (US)
Northbridge Services Group Ltd.
Olive Security Ltd (UK)
Omega Support Ltd. (Hong Kong)
Optimal Solution Services (Australia)
O'Gara-Hess & Eisenhardt
Overseas Security & Strategic Information, Inc (US)
Parasec Strategic Concept (Hong Kong)
RamOPS Risk Management Group (US)
Sandline (UK)
Saracen International (South Africa)
Securicor Hong Kong
Shield Security (South Africa)
Special Project Service Ltd. (UK)
Strategic Consulting International (SCI)
Sumer International Security Iraq [DynCorp]
The Steele Foundation
Triple Canopy Inc.[US]
Vinnell Corporation (US) : A Northrop Grumman Company
Wade-Boyd and Associates LLC



CaptainSpaulding's picture

The Gods have awoken. Black Sabbath live in Paris 1970


Captain Obvious.'s picture

Satan has posession of some wan pansy in an ivory tower. Call the Exorcist.

The Heep.


Duude's picture

There are a number of pseudo-economists that believe hiring one worker to dig a hole and another to fill it in, is good for the economy. That isn't to say they would promote such an idea as there is always plenty of productive work available if money is no object, and it just so happens these same pseudo-economists believe money is no object through more debt and expanding the supply of currency in circulation to pay the bills. These people have their tentaciles deep in Keynesian "thought".

TeethVillage88s's picture


Many Far Reaching Implications here.

-Was Fed Invented to Facilitate War or Extend the British Empire
-Is Low Money Velocity the Result of Government Spending
-Marriage of Capitalism/Socialism/Fascism/Corporatism, Is that just called "Fascism"
-Tweak the Definition of Empire a bit and US = Empire
-Who runs the USA?
-Who Decided USA should be a World Empire
-Will USA continue the Empire in the Face of Dedollarization going on & Less Support from Europe

Missing from Article:

-We spend a lot Overseas not just in stagnant or destroyed Capital, Military Grants, USAID, Construction, Instead of Spending within US Economy
-We actually have more Military personnel than we can house, train in the USA by far
-Current DOD Spending is = to War Spending Levels

I want to Copy this Article and forward to someone.

Congratulation George Washington, a Great Piece.

dirkgd's picture

The following graph perfectly shows the civil war, WWI and WWII impact in the wealth of people:


It illustrates that indeed war does not create economic growth.

davidgdg's picture

This is just The Broken Window Fallacy, described by Bastiat over 150 years ago in "That which is seen and that which is not seen"

RhoneGSM's picture

Think the pro war peeps are a God fearing lot. Maybe they should ask him for an opinion. And of course their kids get to go first as a sign of good faith. 

pazmaker's picture

So many westernized evangelicals patriotic "christians" should dig deeper into their early church fathers and realize that they taught what  Jesus taught... love, compassion, humility, putting others before self.....but for the most part those who call themselves "Christians" especially in the west tend to have amnesia.....

War is a result of all things opposite of the above mentioned virtues..... Greed, Hatred, Selfishness, Egotistic.


Peace to all!

TNTARG's picture

I appreciate the efforts, however I believe it's quite simple: War is only good for the élites.

Nevertheless it's becoming harder to control war because the toys with wich is played are too powerful.

Grouchy Marx's picture

Perhaps if we drafted economists for front line duty, we might see a real recovery of the economy. 

avenriv's picture

it is 2014, not 1914 or 1939.

Any country possesing the nuclear option will use it if it feels threaten.

What sophysticated economy will exist after an atomic war ?