Our economics textbooks and the discussions in our media are peppered with simplistic economic arguments. Sometimes, these arguments form the basis for economic policy. Economic discourse about the Second World War often mentions that the war was " responsible for bringing America out of the Great Depression ". In the middle of the Great Recession, there is a possibility that similar arguments may be made in favor of war. Politicians that are lobbied by special interest groups in the military-industrial complex will find it convenient to vote in favor of increase in funding for war activities by using some of these arguments, which are often specious.
While it is true that an increase in war efforts can lead to higher employment, the nature of economic activity during wartime is very different from that during peacetime. The new jobs created by a war are geared towards the war or wars and are not associated with increase in normal consumption or investment. Therefore, simplistic statements to the effect that wars bring economies out of recessions are not accurate.
Also, the full employment or close-to-full employment brought about by war efforts are not sustainable once the war has ended. New and wasteful projects in the area of defense were probably responsible for the economy not reverting to pre-World War II-like conditions after the Second World War. The ability of the military-industrial-political complex to sell more wasteful military projects to the public is limited at the present time. Also, the current model of wars is to combine a low-tax, pro-corporate, laissez-faire economic model with heavy public borrowing to finance the extra expenditure needed for wars. Some of this public borrowing is from foreign entities. The possibility of such an economic system spinning out of control is always present. And the foreign indebtedness does not help.
Also, the extra expenditure associated with wars can lead to unsustainable debt situations. The current dismal debt scenario in the United States is in no small measure due to wasteful war efforts in the recent past. The current intransigence in the American political establishment about wars being waged by the United States abroad will likely lead to an exacerbation of the debt problem. Moreover, the international linkages of this debt can prove to be a serious problem for the geopolitical calculations of that part of the political establishment that pushes for larger American military presence abroad.
by C. Jayant Praharaj
While it is true that an increase in war efforts can lead to higher employment, the nature of economic activity during wartime is very different from that during peacetime. The new jobs created by a war are geared towards the war or wars and are not associated with increase in normal consumption or investment. Therefore, simplistic statements to the effect that wars bring economies out of recessions are not accurate.
Also, the full employment or close-to-full employment brought about by war efforts are not sustainable once the war has ended. New and wasteful projects in the area of defense were probably responsible for the economy not reverting to pre-World War II-like conditions after the Second World War. The ability of the military-industrial-political complex to sell more wasteful military projects to the public is limited at the present time. Also, the current model of wars is to combine a low-tax, pro-corporate, laissez-faire economic model with heavy public borrowing to finance the extra expenditure needed for wars. Some of this public borrowing is from foreign entities. The possibility of such an economic system spinning out of control is always present. And the foreign indebtedness does not help.
Also, the extra expenditure associated with wars can lead to unsustainable debt situations. The current dismal debt scenario in the United States is in no small measure due to wasteful war efforts in the recent past. The current intransigence in the American political establishment about wars being waged by the United States abroad will likely lead to an exacerbation of the debt problem. Moreover, the international linkages of this debt can prove to be a serious problem for the geopolitical calculations of that part of the political establishment that pushes for larger American military presence abroad.
by C. Jayant Praharaj