Aletho News

Debunking the “War is Good for the Economy” Myth

By James Corbett | BoilingFrogsPost | June 18, 2014

The idea that the Great Depression was finally brought to an end by the onset of WWII has been a staple of history textbooks, documentaries and various war propaganda for decades. This myth continues to be perpetuated to the present day.

The idea that war is good for the economy is, needless to say, a fallacious argument which itself is based on incorrect economic data.

The idea that the economic activity surrounding militarization represents a net economic gain is called the “broken window fallacy.” This fallacy was named and identified by French economist Frédéric Bastiat in his 1850 essay, “That Which is Seen, and That Which is Not Seen,” in which he imagines the case of a shopkeeper whose careless son breaks a pane of glass in his shop window. In Bastiat’s example, ‘that which is seen’ is that the glazier comes, performs the task of fixing the window, and receives six francs for his effort. Onlookers to the scene believe that the economy has actually been bolstered by this act of destruction, since six francs have been spent into it that otherwise would not have been.

But Bastiat notes that what is important is not what is seen, but what is not seen: “It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.”

Similarly, production for war is the broken window fallacy writ large. Economic “gains” produced by government spending on munitions and vehicle manufacture and supplying and equipping the troops are not gains at all; money has merely been diverted to the pockets of the defense contractors via the political cronies in their back pocket.

So why is this important? Because sadly, this myth is being played on by the warmongering class to once again push the idea that war is good and even necessary for economic progress. This time it is not just manufacture of supplies or munitions that are being touted, but war’s ability to justify government spending on investment. No matter how unlikely the threat, or whether it is indeed completely made up, this warped thinking holds that such lies and exaggerations are the answer to our current economic problems.

Sadly, it is not just intellectual deficients like making this case. In a new op-ed in the New York Times, Tyler Cowen of George Mason University argues that technological advances from nuclear research to rocketry to internet and robotics have all been spurred by defense spending, and thus war or threats of war are necessary to continue the advance of civilization.

Why these technologies are ends in themselves, or more valuable than the tens of millions of lives lost in the previous “great wars” is a question left unexamined. Perhaps more to the point, Cowen never addresses why such advances could not take place in the absence of war or without the motivation of advancing the methods of killing as their impetus.

What is most fundamentally upsetting about the mindset that justifies carnage in the name of “economic gain” is that economic gain is usually measured in abstract concepts like GDP growth or increasing equities markets that have no or even negative correlation with the livelihood of the poorest members of society. Income actually shrank by 0.7% for 99% of Americans during the supposed “recovery” of 2009-2011. For the top 1%, income grew 11.5%. This is the type of “help” that massive government spending on bank bailouts and other stimulus measures invariably creates. In times of war, the situation is even more perverse: money is created as debt owed to the banks, backed up by the average working taxpayer, to pay politically-connected defense contractors to create bombs to kill poor brown people on the other side of the planet. This is called economic progress.

Taken to its logical conclusion, there is only one more effective way of solving the problem of poverty. After all, if we are willing to believe the lie that sacrificing lives is good for the economy, why not go that one step further…

June 20, 2014 - Posted by aletho | Deception, Economics, Mainstream Media, Warmongering, Militarism, Timeless or most popular, Video | broken window fallacy, New York Times, Paul Krugman, United States