[Op-ed] War is good for business!

[J]

NYT linky

The Pitfalls of Peace
The Lack of Major Wars May Be Hurting Economic Growth

JUNE 13, 2014
Tyler Cowen


The continuing slowness of economic growth in high-income economies has prompted soul-searching among economists. They have looked to weak demand, rising inequality, Chinese competition, over-regulation, inadequate infrastructure and an exhaustion of new technological ideas as possible culprits.

An additional explanation of slow growth is now receiving attention, however. It is the persistence and expectation of peace.

The world just hasn’t had that much warfare lately, at least not by historical standards. Some of the recent headlines about Iraq or South Sudan make our world sound like a very bloody place, but today’s casualties pale in light of the tens of millions of people killed in the two world wars in the first half of the 20th century. Even the Vietnam War had many more deaths than any recent war involving an affluent country.

Counterintuitive though it may sound, the greater peacefulness of the world may make the attainment of higher rates of economic growth less urgent and thus less likely. This view does not claim that fighting wars improves economies, as of course the actual conflict brings death and destruction. The claim is also distinct from the Keynesian argument that preparing for war lifts government spending and puts people to work. Rather, the very possibility of war focuses the attention of governments on getting some basic decisions right — whether investing in science or simply liberalizing the economy. Such focus ends up improving a nation’s longer-run prospects.

It may seem repugnant to find a positive side to war in this regard, but a look at American history suggests we cannot dismiss the idea so easily. Fundamental innovations such as nuclear power, the computer and the modern aircraft were all pushed along by an American government eager to defeat the Axis powers or, later, to win the Cold War. The Internet was initially designed to help this country withstand a nuclear exchange, and Silicon Valley had its origins with military contracting, not today’s entrepreneurial social media start-ups. The Soviet launch of the Sputnik satellite spurred American interest in science and technology, to the benefit of later economic growth.

War brings an urgency that governments otherwise fail to summon. For instance, the Manhattan Project took six years to produce a working atomic bomb, starting from virtually nothing, and at its peak consumed 0.4 percent of American economic output. It is hard to imagine a comparably speedy and decisive achievement these days.

As a teenager in the 1970s, I heard talk about the desirability of rebuilding the Tappan Zee Bridge. Now, a replacement is scheduled to open no earlier than 2017, at least — provided that concerns about an endangered sturgeon can be addressed. Kennedy Airport remains dysfunctional, and La Guardia is hardly cutting edge, hobbling air transit in and out of New York. The $800 billion stimulus bill, in response to the recession, has not changed this basic situation.

Today the major slow-growing Western European nations have very little fear of being taken over militarily, and thus their politicians don’t face extreme penalties for continuing stagnation. Instead, losing office often means a boost in income from speaking or consulting fees or a comfortable retirement in a pleasant vacation spot. Japan, by comparison, is faced with territorial and geopolitical pressures from China, and in response it is attempting a national revitalization through the economic policies of Prime Minister Shinzo Abe.
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Ian Morris, a professor of classics and history at Stanford, has revived the hypothesis that war is a significant factor behind economic growth in his recent book, “War! What Is it Good For? Conflict and the Progress of Civilization From Primates to Robots.” Morris considers a wide variety of cases, including the Roman Empire, the European state during its Renaissance rise and the contemporary United States. In each case there is good evidence that the desire to prepare for war spurred technological invention and also brought a higher degree of internal social order.

Another new book, Kwasi Kwarteng’s “War and Gold: A 500-Year History of Empires, Adventures, and Debt,” makes a similar argument but focuses on capital markets. Mr. Kwarteng, a Conservative member of British Parliament, argues that the need to finance wars led governments to help develop monetary and financial institutions, enabling the rise of the West. He does worry, however, that today many governments are abusing these institutions and using them to take on too much debt. (Both Mr. Kwarteng and Mr. Morris are extending themes from Azar Gat’s 820-page magnum opus, “War in Human Civilization,” published in 2006.)

Yet another investigation of the hypothesis appears in a recent working paper by the economists Chiu Yu Ko, Mark Koyama and Tuan-Hwee Sng. The paper argues that Europe evolved as more politically fragmented than China because China's risk of conquest from its western flank led it toward political centralization for purposes of defense. This centralization was useful at first but eventually held China back. The European countries invested more in technology and modernization, precisely because they were afraid of being taken over by their nearby rivals.

But here is the catch: Whatever the economic benefits of potential conflict might have been, the calculus is different today. Technologies have become much more destructive, and so a large-scale war would be a bigger disaster than before. That makes many wars less likely, which is a good thing, but it also makes economic stagnation easier to countenance.

There is a more optimistic read to all this than may first appear. Arguably the contemporary world is trading some growth in material living standards for peace — a relative paucity of war deaths and injuries, even with a kind of associated laziness.

We can prefer higher rates of economic growth and progress, even while recognizing that recent G.D.P. figures do not adequately measure all of the gains we have been enjoying. In addition to more peace, we also have a cleaner environment (along most but not all dimensions), more leisure time and a higher degree of social tolerance for minorities and formerly persecuted groups. Our more peaceful and — yes — more slacker-oriented world is in fact better than our economic measures acknowledge.

Living in a largely peaceful world with 2 percent G.D.P. growth has some big advantages that you don’t get with 4 percent growth and many more war deaths. Economic stasis may not feel very impressive, but it’s something our ancestors never quite managed to pull off. The real questions are whether we can do any better, and whether the recent prevalence of peace is a mere temporary bubble just waiting to be burst.

Well, I don't believe there's anything else to add. I was born during the cold war. My grandparents lived through WWII. I have no desires to return to those times.

[Zaune]

Well, it's more productive than austerity.

[Borgholio]

Well, preparing for war IS good for the economy. Massive military spending DOES provide a boost to science, infrastructure, manufacturing, and increased job growth. However, this often comes at the expense of a massive debt increase which has to be dealt with at some point. And if the military buildup leads to an actual war, then a large number of people would be killed and maimed. I don't think that's worth a few extra percentage points of economic growth.

[mr friendly guy]

The article however isn't talking about the increased spending. Its saying that preparing for war forces leaders to make the "right" decisions in terms of economic development. Perhaps there can be some other incentive than war to make leaders more attentive.

[Guardsman Bass]

International competition does some of that, although it's not as violent or intense. War often creates a "your problems can no longer be avoided" factor pressing on a country's organization and production in a way that other, less violent events do not. Plus in the past it also often tended to decimate the ranks of elites, such as aristocrats.

Or as George Orwell said in 1946:

The point is that we are all capable of believing things which we know to be untrue, and then, when we are finally proved wrong, impudently twisting the facts so as to show that we were right. Intellectually, it is possible to carry on this process for an indefinite time: the only check on it is that sooner or later a false belief bumps up against solid reality, usually on a battlefield.

[Darmalus]

Liberalize the economy? Didn't we operate on basically a command economy during WW2?

[Broomstick]

Well, it's more productive than austerity.

I'll take my current austerity over a war.

[Simon_Jester]

I agree with Bass in that wars strip away pretense and force nations to confront their own internal problems, while peace doesn't. I think the reason is the power of vested interests that can stop necessary changes in peacetime... but are afraid to do so during war, for fear of being labeled traitors.

On the other hand, taking serious steps to reduce the power of such vested interests in peacetime might well have much of the same effect. Cowen complains that there's a bridge in New York that took fifty years to replace; that might be a useful example. What factors delayed the repairs, and why?

[Dr. Trainwreck]

I agree with Bass in that wars strip away pretense and force nations to confront their own internal problems, while peace doesn't.

A) Greece has been forced, as of late, to confront its structural problems in absence of war. Regardless of the effectiveness of the reforms, the majority still felt the need for some kind of reform even though it was peacetime. Your theory has a hole somewhere in the "peace doesn't" part of it.

B) My larger point: why is it so important that war can strip away pretense? Does it guarantee reforms will take place? Does it guarantee their effectiveness? Does it guarantee you'll win?

[Metahive]

It's funny that the article makes this claim when wars have been used to do the opposite most of the time, suppress the need to solve internal issues in favor of finding an external scapegoat . Look at North Korea for example which has build its entire identity around "war". Each and every policy is justified because it keeps those evil foreigners from destroying the nation, that's the mantra.

Another example, Germany in WW1 and the infamous "Burgfrieden" which forced all parties to support the government to act united against the external enemy. Heck, Nazi Germany needed the war to actually make its imbalanced economical policies work and the war allowed the government to become more and more oppressive and less compromising as it went on.

[Dr. Trainwreck]

I think the main point of the article is this: War brings an urgency that governments otherwise fail to summon. That, it might do; perhaps we're laid back in peacetime; the question is, why not? Growth is not a positive or a negative by itself unless you believe in growth for growth's sake, but if you do why should anybody take your arguments seriously? Pehaps it was your childhood dream, but other tykes had different dreams. You're not going to convince them to take up yours if your only argument in favor of it is "I believe in it" in lieu of providing concrete benefits.

[Esquire]

Economic growth for its own sake actually makes a lot of sense, because "the economy" isn't really a thing that exists; it's an amalgamated, abstracted measure of general prosperity. By definition, that's a good thing and should be supported.

How that prosperity is distributed is, of course, a different question, but even in the most lopsided economic situation I suspect it's better to be poor in a rich country than poor in a poor one.

[Dr. Trainwreck]

Economic growth for its own sake actually makes a lot of sense, because "the economy" isn't really a thing that exists; it's an amalgamated, abstracted measure of general prosperity. By definition, that's a good thing and should be supported.

Well yes, but he isn't providing something concrete. He says that the pressure of WW2 led to the creation of the atomic bomb, the pressure of the Cold War led to space exploration, and so therefore the pressure of a modern war or military buildup will lead to... ??? What invention is just around the corner nowadays that won't happen unless a war speeds it along? And for that matter, why do we just assume that the things he's talking about wouldn't have come in peacetime, albeit slower and somewhat different?

You see the problem here?

That's not even getting into the fact that he's cherrypicking examples. Which war led to the creation of the lightbulb, or the discovery of alternating current? Which war propelled the automobile, and which war helped television shape the world? Did some jarheads discover penicilin? What rifle led to pasteurization?

For what it's worth, though, he also provides an alternate reading at the end which I agree with. I suspect his motivation (I think he did it so he could go all smuggo and tell you "see, I knew that" no matter what you replied ), but he did it nonetheless:

There is a more optimistic read to all this than may first appear. Arguably the contemporary world is trading some growth in material living standards for peace — a relative paucity of war deaths and injuries, even with a kind of associated laziness.

We can prefer higher rates of economic growth and progress, even while recognizing that recent G.D.P. figures do not adequately measure all of the gains we have been enjoying. In addition to more peace, we also have a cleaner environment (along most but not all dimensions), more leisure time and a higher degree of social tolerance for minorities and formerly persecuted groups. Our more peaceful and — yes — more slacker-oriented world is in fact better than our economic measures acknowledge.

Living in a largely peaceful world with 2 percent G.D.P. growth has some big advantages that you don’t get with 4 percent growth and many more war deaths. Economic stasis may not feel very impressive, but it’s something our ancestors never quite managed to pull off. The real questions are whether we can do any better, and whether the recent prevalence of peace is a mere temporary bubble just waiting to be burst.

[Simon_Jester]

I agree with Bass in that wars strip away pretense and force nations to confront their own internal problems, while peace doesn't.

A) Greece has been forced, as of late, to confront its structural problems in absence of war. Regardless of the effectiveness of the reforms, the majority still felt the need for some kind of reform even though it was peacetime. Your theory has a hole somewhere in the "peace doesn't" part of it.

B) My larger point: why is it so important that war can strip away pretense? Does it guarantee reforms will take place? Does it guarantee their effectiveness? Does it guarantee you'll win?

I'm sorry, apparently you thought I was taking an absolutist stance.

Anyone who wonders why I waffle so much and my posts tend to be ten pages long... it's because otherwise someone will call me out when I start speaking in declarative sentences again.

Can a big enough crisis force a nation to confront structural flaws in peacetime? Yes, in principle- but it has to be a pretty fucking big crisis, as the example of Greece demonstrates.

If you got the point of my post, though, what I was really interested in was understanding why reforms are blocked in peacetime. Fighting a war in hopes that it will somehow remove these barriers is a bad strategy. It is better to understand the barriers, without having to fight a war.

You may understand my position better if you reread the post with that in mind.

[Esquire]

Well yes, but he isn't providing something concrete. He says that the pressure of WW2 led to the creation of the atomic bomb, the pressure of the Cold War led to space exploration, and so therefore the pressure of a modern war or military buildup will lead to... ??? What invention is just around the corner nowadays that won't happen unless a war speeds it along? And for that matter, why do we just assume that the things he's talking about wouldn't have come in peacetime, albeit slower and somewhat different?

You see the problem here?

That's not even getting into the fact that he's cherrypicking examples. Which war led to the creation of the lightbulb, or the discovery of alternating current? Which war propelled the automobile, and which war helped television shape the world? Did some jarheads discover penicilin? What rifle led to pasteurization?

For what it's worth, though, he also provides an alternate reading at the end which I agree with. I suspect his motivation (I think he did it so he could go all smuggo and tell you "see, I knew that" no matter what you replied ), but he did it nonetheless.

I don't disagree. My point was that increased prosperity is pretty much axiomatically a good thing. The tie-in with the article is a little less direct; I think the author may have stumbled into a good point even though his examples are cherrypicked. The real "use" of wars for economic growth - and this is specific to the US and the Second World War, I think, which is where he seems to be drawing from - is in forcing governments to shell out for infrastructure improvements, not in "prompting innovation" or some such nonsense.

I'm of the opinion that the next major challenges will be about implementing or fine-tuning existing technology rather than massive paradigm-shifting inventions like we saw in the last two centuries, but we can't do that if all the roads, factories, bridges, and public buildings start falling apart because they were either stopgap wartime measures or haven't been maintained because politicians would rather grow about reducing spending while keeping their massively-inflated military procurement process.

[Shinn Langley Soryu]

Did some jarheads discover penicilin?

Alexander Fleming served as an officer in the Royal Army Medical Corps during World War I; not quite a jarhead, but close enough for the purposes of this discussion. Also, while there were attempts to purify and produce penicillin prior to World War II, it was not until during World War II that those processes were perfected.

[Dr. Trainwreck]

I don't disagree. My point was that increased prosperity is pretty much axiomatically a good thing. The tie-in with the article is a little less direct; I think the author may have stumbled into a good point even though his examples are cherrypicked. The real "use" of wars for economic growth - and this is specific to the US and the Second World War, I think, which is where he seems to be drawing from - is in forcing governments to shell out for infrastructure improvements, not in "prompting innovation" or some such nonsense.

The author's examples, though, are "prompting innovation" all the way. So you can say that improving infrastructure is useful (until it gets blown to bits anyway), but it's outside the article's scope.

I'm of the opinion that the next major challenges will be about implementing or fine-tuning existing technology rather than massive paradigm-shifting inventions like we saw in the last two centuries, but we can't do that if all the roads, factories, bridges, and public buildings start falling apart because they were either stopgap wartime measures or haven't been maintained because politicians would rather grow about reducing spending while keeping their massively-inflated military procurement process.

I don't disagree, and I also don't see how war would be necessary for that.

[Dr. Trainwreck]

Anyone who wonders why I waffle so much and my posts tend to be ten pages long... it's because otherwise someone will call me out when I start speaking in declarative sentences again.

But you're killing slow connections, man.

Can a big enough crisis force a nation to confront structural flaws in peacetime? Yes, in principle- but it has to be a pretty fucking big crisis, as the example of Greece demonstrates.

If you got the point of my post, though, what I was really interested in was understanding why reforms are blocked in peacetime. Fighting a war in hopes that it will somehow remove these barriers is a bad strategy. It is better to understand the barriers, without having to fight a war.

You may understand my position better if you reread the post with that in mind.

I dunno, your theory doesn't seem too useful in explaining things. I mean, you proposed, as an explanation, that vested interests may be afraid of being called traitors in wartime and so stay silent... but it's just as easy to label the reformers as traitors. And in this post, you seem to say "well peace doesn't normally force change, except for when it does".

Did some jarheads discover penicilin?

Alexander Fleming served as an officer in the Royal Army Medical Corps during World War I; not quite a jarhead, but close enough for the purposes of this discussion. Also, while there were attempts to purify and produce penicillin prior to World War II, it was not until during World War II that those processes were perfected.

Okay, good catch.

[Esquire]

I don't disagree. My point was that increased prosperity is pretty much axiomatically a good thing. The tie-in with the article is a little less direct; I think the author may have stumbled into a good point even though his examples are cherrypicked. The real "use" of wars for economic growth - and this is specific to the US and the Second World War, I think, which is where he seems to be drawing from - is in forcing governments to shell out for infrastructure improvements, not in "prompting innovation" or some such nonsense.

The author's examples, though, are "prompting innovation" all the way. So you can say that improving infrastructure is useful (until it gets blown to bits anyway), but it's outside the article's scope.

I'm of the opinion that the next major challenges will be about implementing or fine-tuning existing technology rather than massive paradigm-shifting inventions like we saw in the last two centuries, but we can't do that if all the roads, factories, bridges, and public buildings start falling apart because they were either stopgap wartime measures or haven't been maintained because politicians would rather grow about reducing spending while keeping their massively-inflated military procurement process.

I don't disagree, and I also don't see how war would be necessary for that.

We're talking past each other. Sorry about that.

I'm with you that the author's examples are silly and that war is the worst of all possible ways to stimulate economic growth, but he does actually have a point that it is on that list, if you see what I'm getting at. We Americans tend to look at everything as part of our own national narrative, and in that narrative WW2 forced the government to spend vast sums on industry and infrastructure that, since none of WW2 actually happened in America, are still there today. The innovations were largely made by people from other countries working from theories developed during peacetime, but that's also not part of the narrative.

So, yes, I think that article is right in saying that war is good for business - or at least, the specific war for the specific country. Just not for the reasons it gives. Whether that's off-topic or not is for you to decide, but I don't think it's too much of a stretch.

[Alyrium Denryle]

That's not even getting into the fact that he's cherrypicking examples. Which war led to the creation of the lightbulb, or the discovery of alternating current? Which war propelled the automobile, and which war helped television shape the world? Did some jarheads discover penicilin? What rifle led to pasteurization?

Actually.... a lot of those were influenced by war. Or at least international conflict, violent or no. Open heart surgery, reconstructive surgery, prosthesis technology, antibiotics, rocketry, the internet, computers, encryption. All of these things came into existence due to wars (even cold ones) or to help deal with their aftermath. Hell, even engines got some leaps forward IIRC due to wars by way of planes, tanks, and ship construction. The rate of technological advancement does increase with military necessity.

[Korto]

Although one thing he doesn't mention is that war doesn't necessarily force you to make the right decisions. It forces you to make the right now decisions.

[Gandalf]

What the article should say is that fear is the stimulus that affects the economy. Fear of Germany, fear of the USSR, fear of... whoever. Fear doesn't help the economy, it brings people into line. Sometimes this can be used for economic benefit.

Where does war money even go nowadays? Weapons guys, reconstruction guys, anyone else?

[Block]

Robotics, prosthetics, electronics

[Simon_Jester]

I dunno, your theory doesn't seem too useful in explaining things. I mean, you proposed, as an explanation, that vested interests may be afraid of being called traitors in wartime and so stay silent... but it's just as easy to label the reformers as traitors. And in this post, you seem to say "well peace doesn't normally force change, except for when it does".

My real opinion is that crisis forces change, by stripping away popular support for failed policies and destroying factions that would act to oppose the change. The crisis may be military, political, economic... anything.

Military crises are good for causing some kinds of changes (infrastructural and technological) but not so good for causing others (political and social change are usually on hold for the duration of a war, though the losing side in a war often experiences drastic changes).

Cowen is thus at least partly right, but hasn't generalized his theory far enough.

Now, changes can occur without crisis- but they are not forced without crisis. Cowen's complaint is that America is not changing fast enough. That even basic, very commonsense measures like infrastructure upgrades simply aren't happening, despite nearly everyone thinking they are a good idea. He seems to speculate that crisis (in his mind, war or at least 'cold war') is needed to make those changes happen.

The question to me is, why do these changes not occur? Who is responsible? Could these things happen without a crisis to provide impetus? I'd like to think so, but to make that happen we need a more detailed analysis of what is preventing change, and whether it can be bypassed without provoking a national crisis.

[Grumman]

My real opinion is that crisis forces change...

Or even more broadly, the appearance of crisis forces change. You don't even need a real crisis if you can sell people a line of bullshit about how "the next smoking gun might be a mushroom cloud". Or look at the last Australian budget, where Abbott used a debt crisis that seems to have sprung forth fully formed from his arse to justify causing chaos across the entire thing.