IG’s Peace Blog

Peace and its many aspects

Is war good for the economy?

It ocurred to me today that I had neglected one of the big issues in regard to war and peace:  is war good for the economy?  This is not as straightforward a question as some might think.  Certainly, astronomical fortunes have been made in the arms industry.   As one of my favorite ’60s bands, Country Joe and Fish, put it:

“Come on Wall Street, don’t be slow,
Why man, this is war au-go-go
There’s plenty good money to be made
By supplying the Army with the tools of its trade,
But just hope and pray that if they drop the bomb,
They drop it on the Viet Cong.

(the whole lyrics here )

Also, the sudden spike in demand for military related products at the start of World War II is probably what put an end to the Great Depression.  Finally, in this regard, we know that when a country tries to close down arms industries and military bases, as in various countries with the end of the Cold War, this can have a significant negative impact on both the local economies and on the entire national economy–making such closures politically very unpopular.

However, if you step back from the question and try to consider the basics, the picture seems rather different.  One key aspect of investment is its “spin off” (or what the British call “knock on” effects).  You invest in something, such as say solar energy, which reduces costs here, frees resources there, and goes on to stimulate production and innovation in other areas.  To make a long story short, if you make the same investment in military and non-military (ie “normal”) economic sectors, you should get more spinoffs from the non-military sectors.   Why, because much military investment does not produce spinoffs–once you get your tank you don’t produce anything else with it.  This is not a “problem” strictly speaking since we don’t invest in military areas for profit and growth; we invest in them for security.   So, if we don’t need as much security, we should be able to invest more elsehere and get much more overall growth.

But you say, what about all the technical innovation that has come from military related research and development (the Internet ,for example!).  However, you need to go back to the original premise, which is that the same amount of investment is made in both sectors.  It stands to reason that if huge amounts of money are invested in military related research, something will be discovered.  It also stands to reason that if the same amount were invested in the “regular” economy many more productive discoveries would be made.   Right now, in the U.S. the government provides heavy subsidies to military research–in the name of security–but far less to other areas (some think this would smack of socialism).

So, to sum up:  sure you can generate growth through military spending.  However, you could, at least theoretically, generate much more growth through investing in non-military research, development and production.

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April 15, 2009 - Posted by | Uncategorized | , ,

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