War symbolizes economic decline like nothing else precisely because it’s defined by the extermination of the very people who create all the growth. The sad fact that economists near unanimously contend that war has a growth upside discredits the profession like nothing else.
The speculation here is that American Institute for Economic Research fellow Julia Cartwright would agree with much that’s just been written. That’s because in a recent piece at the Washington Post, she raised much more than an eyebrow to the popular notion inside the commentariat (and fed by GDP-worshipping economists) that “Military spending is good for the economy.”
Cartwright reminds readers correctly that the consumer spending and investment that add to GDP are different from government spending that similarly adds to GDP because consumer spending and investment are “disciplined by reality.” There’s no argument with Cartwright there, but there is a substantial quibble with a crucial omission from her.
Let’s start with the obvious: GDP is less than worthless. Most of us, including the individual you’re reading, can’t calculate the GDP of the street they live on, but economists think they can measure a nation? The obnoxious conceit informing government statistics thoroughly discredits them.
Next, contemplate the notion of economists adding government to a growth number. What Cartwright omitted is that such an addition speaks to double counting on a level that would horrify the most crooked of crooked accountants. Governments have no resources, which means they can only spend insofar as they’re consuming the fruits of economic growth that already happened.
No doubt some will say (Cartwright does) that some government functions are necessary, after which wise minds can debate the good and the bad ones. That debate can and should happen, but it’s still true that government consumption subtracts from growth despite GDP suggesting otherwise.
With war, it’s all about economic decline. See above. People drive all growth, yet people are exterminated during war. Worse, war forces the people not being exterminated to redirect their production to armaments necessary to kill more people and destroy more wealth. War is depression. Cartwright adds that contra economists who tragically claim to this day that WWII revived the U.S. economy, that actual Americans suffered mightily as production was halted in favor of war production such that Americans suffered the rationing of “meat, butter, gasoline and shoes.”
Where Cartwright could perhaps be convinced to rethink her argument is in her assertion that to pay for war, governments frequently borrow “which shifts the burden to future taxpayers.” No, that’s not true. See Cartwright’s description of life during WWII. All government consumption, particularly war consumption, is a tax felt right now in terms of less production, and less progress in all ways. As evidenced by the low rates charged to Treasury for borrowing, “future taxpayers” have it relatively easy simply because markets keep telling us through low Treasury yields that debt payment is the easy part. The real crisis is what we suffer now as governments substitute themselves for the marketplace in the allocation of precious resources.
Cartwright is surely correct that post 9/11, the Bush administration weighed us down with surges in spending. Still, markets are forward looking. That they are calls into question her puzzling tie of the spending to the so-called “financial crisis of 2008.” Sorry, but there was nothing “financial” about the latter. The “crisis” was government intervention in the natural workings of the market by the Bush administration, nothing else. When governments don’t interrupt correcting markets, there’s never a crisis.
Which is perhaps a digression as is. The main thing is that Cartwright is right about the fallacy of war and economic growth, but arguably understates her case.
