Tuesday, May 18, 2010

How the War Depresses the U.S. Economy

by Len Hart, The Existentialist Cowboy

The cost of Bush's war on Iraq, left to Obama to 'finish' and clean up, passed the one trillion dollar mark some time ago but has yet to support or prove the old lie that 'wars are good for the economy'. Where is the evidence that the $Trillion$ spent murdering and torturing people in a nation that was, in fact, no threat to the United States, has created a single job on the home front? In fact, those $Trillion$ blown up in Iraq are lost forever --not having created a single new job.

Instead, manpower that might have been employed in productive industries was diverted to destructive and false causes. Instead of creating futures, we will be lucky to escape a tragic end!

The fact is, war is parasitic, destructive not of enemies but of the home front economy. Even if the U.S. should win militarily, the war is lost on the home front where it continues to be paid for by the subversive and depressive effect it has had upon productive industries and activities that provide real jobs, viable opportunities, exports!

War is not only a 'racket', as Gen. Smedley Butler so famously declared, it is a parasite!

What is often overlooked is the military example Bastiat uses in the essay. He discusses the demobilization of one hundred thousand soldiers from the French army – a prospect many entertain with dread, for what will these men do for a living? And what about the foregone stimulus to French businesses previously provided by the military’s expenditures on wine, clothes, and weapons for these men? Of course, such critics are focusing once again only on what is seen. They fail to consider that the money that had previously been confiscated from the taxpayers in order to support the soldiers will now be available for other purposes, including expenditures on goods that these demobilized soldiers can devote themselves to producing. Likewise, the money the military once spent on wine, clothes, and weapons can now be spent on other things, so here again economic activity is none the worse for the soldiers’ demobilization

--Thomas Woods, Jr., The Neglected Costs of the Warfare State
Only the Military/Industrial complex benefits from war; what is good for the MIC is NOT good for the country. The MIC is a drag on the economy, an economic black hole into which is drained the economic and creative resources of the nation. War itself is a Faustian bargain in which the soul of a nation is eagerly exchanged for short-term war booty, in this case, oil! When the U.S. itself produced oil, jobs were created in the 'drilling industry'. Stealing the oil resources of a foreign nation which had nothing whatsoever to do with 911 has surely created a net deficit of jobs as the final figures, I am sure, will prove.

The war of aggression against the people of Iraq by an imperial nation will be shown to have been the primary cause of the recent economic crises, all which are related to the more fundamental fact that the U.S. is no longer a productive nation. The proof of that may be found at the CIA's 'World Fact Book' which lists the U.S. at the bottom of a list with the world's largest negative 'Current Account Balance'; China tops the list with the world's largest positive 'Current Account Balance'. If the U.S. were still productive and exporting the products of its labor, it would at least be nearer the top! But the U.S. is on the very rock bottom, a position resulting directly from the incompetence of GOP regimes: Nixon, Reagan, Bush and Bush!

As Gore Vidal maintained in his 'Decline and Fall of the American Empire', the economic benefits of building a tank are temporary. Once built, the tank is a drag, requiring more to upkeep than war booty can justify. In the meantime, monies used to build the tank are lost to outcomes more productive at home and less destructive abroad, outcomes upon which a viable economy absolutely depends. In the end, only the military contractors building the tank or maintaining it have benefited but they will have done so at taxpayer expense. In the end, the building of a tank and the other weapons of war will have returned absolutely nothing for the investment. The taxpayer will have underwritten a war crime with their taxes. On a larger scale, the Pentagon itself is an economic black hole, having sucked the life blood from the US economy.

The idea that wars and military spending increases are good for the economy is sold and promoted. In fact, new studies now confirm what I have always believed and what Gore Vidal had stated in his classic: The Decline and Fall of the American Empire.
Nobel Prize-winning economist Joseph Stiglitz has blamed the Iraq war for sending the United States into a recession. On Wednesday, he told a London think tank that the war caused the credit crunch and the housing crisis that are propelling the current economic downturn. Testifying before the Senate's Joint Economic Committee the following day, he said our involvement in Iraq has long been "weakening the American economy" and "a day of reckoning" has finally arrived.

--Is the Economy a Casualty of War?
Now --war critics have the economic data and models proving that military spending 'diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment.' This thesis is likewise confirmed in a paper by Thomas E. Woods at: http://www.mises.org/journals/scholar/woods2.pdf

Sadly, few progressives have had the courage to state the obvious: the war against Iraq is 'instant Karma', its own revenge upon the deterioration of American values and its converse: the rise of imperial arrogance and the resulting fascist state! While still in office, Bush stated that "spending on the war might help with jobs"! Consider the psychopathic arrogance betrayed in that one statement alone! Bush said, in effect, that it is OK to murder people abroad if it provides jobs at home. It is OK to wage war upon civilians in order to juice up jobs on the home front. Doubly tragic, it failed even that. Chalk up yet another cold-blooded lie to Bush and his crime syndicate --the GOP!

When the stats are all in, Bush Jr will rank with his father and Ronald Reagan among the very worst U.S Presidents in terms of job growth/creation, worst among all U.S. Presidents in terms of GDP growth! Claims that the 'recession' was due to a 'housing bubble' are hollow, disingenuous, or, at best, naive! In the meantime, the GOP will willingly bomb hell out of a sovereign nation which it knew had no WMD in order to get the jobless off the streets of shell cities like Detroit and into the front lines in Iraq. Ancient Rome could not have been or done worse and didn't!

The heights of absurdity issued from the mouths of those who should know better, specifically, Desmond Lachman, economist and resident fellow at the conservative American Enterprise Institute. He said that simply removing the billions of dollars a year in Iraq spending from the economy without replacing it could actually make the recession worse, because the spending drives demand and keeps people employed. "War spending helped the U.S. get out of the Great Depression," Lachman says. He misses at least two points while betraying a psychopathic lack of 'humanity'. Lachman, in effect, believes that Iraqi lives are worthless and that their deaths are but a means by which Americans may avoid an inconvenience or temporary hardship. Additionally --he is wrong about 'war' as an economic cure-all. For example, the U.S. did not begin a real or lasting recovery until about one year after World War II was over and therefore could not have contributed to the recovery. The other point missed is that those moneys 'blown up' in Iraq have now been lost forever to the U.S. economy. Result: contraction. The other word for contraction is 'depression'.
White House economic adviser Lawrence Lindsey was the exception to the rule, offering an "upper bound" estimate of $100 billion to $200 billion in a September 2002 interview with The Wall Street Journal. That figure raised eyebrows at the time, although Lindsey argued the cost was small, adding, "The successful prosecution of the war would be good for the economy.”

--Cost of Iraq war could surpass $1 trillion
The U.S. has been in a state of perpetual war since the so-called Spanish-American war made of this nation an empire. But it was, specifically, according to Gore Vidal in The Decline and Fall of the American Empire, the moment at which the US became a net debtor nation that the US empire ceased to be a viable nation. It is fair to ask: is America a 'failed state'?

Americans are led to believe that the US can simply 'war' its way out of economic disaster. In fact, the US fights wars with monies it doesn't have in the expectation of booty it may never realize, booty that, in any case, has never benefited the economy. The Iraq war may, indeed, finish us off.
Washington, DC: The Center for Economic and Policy Research released a report today estimating the economic impact of increased US military spending comparable to the spending on the Iraq war. The report, presenting the results of a simulation from the economic forecasting company Global Insight, shows the increased level of military spending leads to fewer jobs and slower economic growth.

For the report, The Economic Impact of the Iraq War and Higher Military Spending, by economist Dean Baker, CEPR commissioned Global Insight to run a simulation with its macmacroeconomic del. Global Insight's model was selected for this analysis because it is a commonly used and widely respected model. It estimated the impact of an increase in annual US military spending equal to 1 percent of GDP (approximately equal to the military spending increase compared with pre-September 11th baseline).

The projections show the following:

-- After an initial demand stimulus, the effect of increased military spending turns negative around the sixth year. After 10 years of higher defense spending, there would be 464,000 fewer jobs than in the baseline scenario with lower defense spending.

-- Inflation and interest rates are considerably higher. After 5 years, the interest rate on 10-Year Treasury notes is projected to be 0.7 percentage points higher than in the baseline scenario. After 10 years, the gap would rise to 0.9 percentage points.

-- Higher interest rates lead to reduced demand in the interest-sensitive sectors of the economy. After 5 years, annual car and truck sales are projected to go down by 192,200 in the high military spending scenario. After 10 years, the drop is projected to be 323,300 and after 20 years annual sales are projected to be down 731,400.

-- Construction and manufacturing are the sectors that are projected to experience the largest shares of the job loss.

"It is often believed that wars and military spending increases are good for the economy," said Baker. "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."

The report recommends that Congress request the Congressional Budget Office produce its own projections of the economic impact of a sustained increase in defense spending. If wars are disastrous for the economy, then why does government insist upon fighting them when clearly 'national security' is simply not at risk?

--Report Shows Increased US Military Spending Slows Economy
America's ruling elite have found nirvana --a war which need never end, a war in which victory is impossible to define and would not be recognized, a war in which victory is, in fact, impossible. A war which achieves precisely what it is intended to achieve: the enrichment of a tiny ruling elite for whom your rights mean absolutely nothing.
For big government we now have "The Perfect War," everywhere and nowhere, secret and interminable. The war will justify ever expanding police powers, higher taxes, and more controls over the citizenry. You can see easily how Washington thrives on war. Since Sept 11th, there have been no nasty challenges to government spending and waste, no tedious debates over things like social security "lockboxes," nor "political" attacks upon the Presidency. Congressmen and Think Tank experts get lots of TV time and most everyone jumps to obey government orders and support more regulations. Any groups opposed to American military interventions overseas appear unpatriotic and are marginalized, while press coverage of the war is restricted, using the last Gulf War as a model. Big Government, as Orwell wrote, thrives from unwinnable wars; it doesn't get any better than this.

--John Basil Utley, Alternative to Unending War, Ludwig von Mises Institute
War is no longer waged by nations but by huge multi-national corporations. They have hijacked the apparatus of state in order to wage war, and wage war in order to maintain elite status. It's a malevolent scheme in which a ruling elite of just one percent of the population benefits from the U.S. war crime against the people of Iraq. Simply, the big corporations --of late accorded rights that should, by right, belong only to real people --make their 'living' killing real people. Real people are now victimized by a souless machine with whom the U.S. Supreme Court is complicit, ergo: illegitimate! The 'Supremes' have anointed Moloch.

The most obvious beneficiaries of this new 'Moloch' are gun and armament manufacturers and the hired killers of Blackwater, Bush's Praetorian Guard.
A tyrant is a single ruler holding vast, if not absolute power through a state or in an organization. The term carries connotations of a harsh and cruel ruler who place their own interests or the interests of a small oligarchy over the best interests of the general population which they govern or control. This mode of rule is referred to as tyranny. Many individual rulers or government officials get accused of tyranny, with the label almost always a matter of controversy.

- Tyranny

One is reminded of John Maynard Keynes' prescription for full employment.
If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.
Certainly --there are more productive, meaningful and creative ways of keeping the genius and labor of good people employed for the greater good of our species and the precious earth we live on. Keynes was correct, however, when he proposes that just 'digging' up bank notes in a landfill is preferable to the destructive and insidious 'industry of war'!


Peerless Cynic said...

Great post, very well done. Among the many points that stand out, the following quote really resonates with me:

"America's ruling elite have found nirvana --a war which need never end, a war in which victory is impossible to define and would not be recognized, a war in which victory is, in fact, impossible. A war which achieves precisely what it is intended to achieve: the enrichment of a tiny ruling elite for whom your rights mean absolutely nothing."

kenny said...

Very good analysis Len. Hope you don't mind that I borrowed some of it, with credit to you, in my latest rant.

War machine job creation/economic stimulus as a political platform is a sick lie.

Unknown said...

Thanks Peerless :)

kenny's sideshow sez...

War machine job creation/economic stimulus as a political platform is a sick lie.

I appreciate the credit, Kenny and I agree with you completely. It's sick and it was/is catching.

Anonymous said...

Len - You beautifully express what every politician in America is afraid to admit - the biggest waste of tax dollars in history is the Pentagon. The uneducated rubes in America have been led to believe that militarism equals patriotism. They are dead wrong and this will be the undoing of the American empire.

Unknown said...

Anonymous said ..

...this will be the undoing of the American empire.

I think you are absolutely correct. The break up of the 'empire' must not be considered a bad thing, rather, a cause for celebration if not a Cause Celebre. There is a downside --the fate of millions who are absolutely dependent upon an economy that would not exist if it were not on a permanent war footing. The U.S. has nothing to cushion its fall; I can think of NO U.S. export that could replace the U.S. export of DEATH AND DESTRUCTION! We are out of oil, the primary motive for war. And, thanks to Reagan and the Bush clan, we trail the rest of the world in almost EVERY OTHER CATEGORY --cars, cameras, steel, electronics. What the fuck do we produce but death and destruction?

As proof of my assertion, check the CIA's own 'World Fact Book' where the U.S. is on BOTTOM with the World's LARGEST NEGATIVE Current Account Balance, previously called the 'balance of trade deficit'. CHINA is on top with the world's LARGEST POSITIVE Current Account Balance, primarily because CHINA dumps its product on the U.S. by way of Wal-Mart --the economic KUDZU that ate America.

And there will be no 'giant sucking sound' upon our fall but a global sigh of relief!

tony said...

the governator started off with cutting schools and giving the money to the prisons isn't that right?

Unknown said...

Tony sez ...

the governator started off with cutting schools and giving the money to the prisons isn't that right?

I call that the 'Texas Model' though I'm not sure which state was first to do it. It's deliberate! It's HOW the GOP enslaves the population. First --they slash funds for education; second--they 'contract' the construction and management of prisons to 'PRIVATE ENTERPRISE', the GOPs SACRED FUCKIN COW. Then when failure SKYROCKET and literacy rates tank, CRIME ALWAYS INCREASES. Guess what!! The increases in crime, ALWAYS HIGHER IN GOP STATES, fills up the CORPORATE PRISONS.

This is just ONE WAY in which the GOP/RIGHT WING FASCISTS will enslave America.

Income Protection Insurance Redundancy said...

War have always been a huge destroyer of a nation's economy.