The Myth of War Prosperity
has many costs, both human and economic, that must be carefully considered now
that an invasion of Iraq appears imminent.
The greatest cost of war, of course, is the cost in human lives.
We all hope and pray that no Americans are killed or injured in Iraq.
But the economic costs of war must also be considered.
is a commonly-held myth that war creates prosperity.
Many believe that World War II ended the Great Depression.
Unemployment went down because hundreds of thousands of men were drafted,
and factories at home busied themselves with war production.
This provided the illusion of a bustling wartime economy.
But in truth the economy shrank and GDP plummeted.
The hidden costs were enormous, because so much human energy and human
capital was expended fighting the war rather than doing productive, specialized
work back home.
broken window fallacy applies to our current dilemma in the Middle East.
The situation in Iraq is the broken pane of glass, and “fixing” it
will appear to benefit the economy in the short run.
Certain industries will certainly benefit.
But the hidden opportunity costs will again be enormous.
The hidden costs will be the loss of economic activity that would have
occurred if the money spent waging war had instead been spent at home.
is certain during wartime, as the Treasury prints more money to fund military
dollar will become weaker against other currencies because of the uncertainty
caused by turmoil in the Middle East.
Control of Iraqi oil wells, which is often cited as an economic windfall
from the war, is not guaranteed and might not happen quickly.
Oil prices almost certainly will skyrocket and will remain inflated after
the war, especially given the deteriorating buying power of our own dollars.
We should expect the financial markets to react badly to an invasion of Iraq. Although military victory should be swift, prolonged urban fighting in Baghdad or other cities would cause investor confidence to plunge. This lack of confidence in the U.S. economy will make trade more difficult and cause our trade deficit to rise.
taxes or deficits necessarily rise when the nation’s productivity falls
because of war.
Estimates of war spending range from $100 billion to $200 billion, a
figure that does not include tens of billions needed for nation-building in
Afghanistan and Iraq.
As with past wars, a huge surge in spending will happen as tax revenues
are falling dramatically.
This spending can be sustained only by printing more money, borrowing
from foreign nations, or raising taxes- all of which harm the economy.
greatest economic cost of war, however, comes from the expansion in the size and
scope of government.
Government always grows during wars and other crises.
As economist Murray Rothbard noted, government uses crises to “Engineer
the great leaps forward,” in the size of the state.
When the crisis ends, government never returns to its former size.
As government expands, individual liberty necessarily shrinks.
True prosperity cannot exist without individual liberty and its
corollaries of limited government, property rights, and free markets.
Ultimately, war leaves us with less freedom at home.
The sad irony is that while our soldiers have fought for the freedom of
Europe, Korea, Vietnam, Kuwait, and Iraq, the government uses war to steadily
diminish freedom here at home.
While we fight a war in Iraq, we must also fight to maintain and restore
individual liberty in America.