“War ALWAYS Causes Recession”

PhD economist Marc Faber predicts that the U.S. will launch a war to distract people from the bad economy.

China’s largest media outlet – Sohu.com – wrote in October 2008 that the Rand corporation, a leading U.S. military advisor, lobbied the Pentagon for a war to be started with a major foreign power in an attempt to stimulate the American economy:


According to French media, well-known U.S. think tank RAND Corporation … has submitted [to the Pentagon] an evaluation report assessing the wage a war to shift the feasibility of the current economic crisis…

Continued deepening of the U.S. sub-prime mortgage crisis and economic downturn, developed to a certain extent, is likely to trigger a war in order to achieve the purpose of the crisis passed.

(Google’s translation services are crude approximations, but Yihan Dai confirmed the translation of the original).

Is Faber right? Is the Sohu.com report accurate?

I don’t know. For example, I won’t take the Sohu.com claim very seriously until someone can point to the French media source, so that I can assess it’s credibility.

However, “military Keynesianism” – using military spending to stimulate the economy – has been U.S. policy for half a century. And the economist who coined that term said that such a policy always and “inexorably” leads to “an actual war” in order to justify all of the military spending.

Therefore, any studies which disprove the efficacy of war as an economic stimulus -see this and this – are important for balance.

In addition, contrary to popular belief, some writers say that the reason that WWII actually stimulated the U.S. economy was not because of America fighting the war. Specifically, they argue that America’s ramped-up production of armaments for the British before the U.S. entered the war was the thing which stimulated our economy.

To try to sort some of this out, I spoke with a PhD professor of economics with a background in international conflict in July 2008 to find out whether war is really good for the economy.

I asked if conventional wisdom that war is good for the economy is true, especially given that all of the spending on the war in Iraq seems to have weakened America’s economy (or at least, greatly increased its debt).

The economist explained the seeming paradox:

“War always causes recession. Well, if it is a very short war, then it may stimulate the economy in the short-run. But if there is not a quick victory and it drags on, then wars always put the nation waging war into a recession and hurt its economy.”

Given that America has been fighting both the Afghanistan and Iraq wars longer than it fought WWII, the exception obviously doesn’t apply.

Can America go beat up some poorly-armed country to get a quick war?

It is more unlikely than many assume. Given that many believe that the U.S. started the Iraq war based on false pretenses, and that the Iraq war was really about oil (see this, this, this, this and this), I am skeptical that many would buy America’s stated justifications for another war.

Indeed, the Sohu.com article – even if wholly untrue – proves my point.

In addition, even a war against a small, poorly-armed and resource-poor country could be considered a proxy war. In other words, other heavily-armed countries might fight the U.S. through local proxies, dragging the war out for years, just as the U.S. did with Russia in Afghanistan. America today is not the empire it was even 10 years ago, and – as Afghanistan and Iraq show – America no longer has the financial resources to project force and impose its will world-wide.

The bottom line is that anyone advocating for war to help our economy is mistaken.

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  • http://www.blogger.com/profile/09469760565180198154 NotZed

    Well do the current 2 wars count as 'starting a war'? Or do they need another easy target like 'regime change' they can actually achieve with a bit of shock and awe for the newsclowns to salivate over? Like a North Korea (doubt that) or Iran (most likely?) they can bomb back to the dark ages?"The bottom line is that if anyone is advocating for war the help our economy, they are mistaken."And if only a 'mistake' was the problem. It's also dangerous, immoral, etc etc.

  • http://www.blogger.com/profile/18198784128869830094 Sqroot

    It is amazing to me you have to use tortured logic to claim Bush used 9/11 to attack Iraq. I think everyone reading this is old enough to have lived through 9/11. Never, in my memory, did Bush try to tie Iraq to 9/11. In fact, I can remember his denying it except for some wounded Al Qaeda person seeking treatment there and possibly a meeting with one of Hussein's security people. Everyone believed Hussein had WMDs and he had broken several UN resolutions, and he had broken the cease fire from the Gulf war. Those were the reasons taken to Congress and the UN. Talked about for months and months. Look it up, I'm sure it's all here on the net.Remember, we had fighters flying over Iraq 24/7 from the close of the Gulf war right up to invasion. Also, remember the mood after 9/11. Eight years later, you can't just ignore all that stuff and sit in your easy chair and type out some bullshit… No wait, I guess you can!

  • http://www.blogger.com/profile/16292980282480526542 bosunj

    The 9-11 "attacks"? Shrub did try to conflate Saddam with 9-11. Faux News did their level best to beat it into every Duhmerican's head at least ten times a minute all day every day. Sickening pathetic spectacle that they are. Eight years later and Duhmerica still hasn't learned its lesson. Even Gorbachev suggests that Duhmerica will get handed its hat by Afghanistan. He's right too especially because Duhmerica is funding the Taliban. Go figure.

  • http://Anonymousnoreply@blogger.com Anonymous

    I've not been able to track the "original" French Media Source. On the contrary, all the French articles that I have found takes the news from Sohu, and say the origine of the news is France but don't provide a clue of what this source is. From the French article (found on alterinfo.net), I can not even say that the source is a "media". Could be anything.

  • http://Anonymousnoreply@blogger.com Anonymous

    "The reason I keep insisting that there was a relationship between Iraq and Saddam and al Qaeda: because there was a relationship between Iraq and al Qaeda," Bush said after a Cabinet meeting. As evidence, he cited Iraqi intelligence officers' meeting with bin Laden in Sudan. "There's numerous contacts between the two," Bush said. http://www.washingtonpost.com/wp-dyn/articles/A50679-2004Jun17.htmlAlso many claimed Saddam had no WMD, no need to provide proof.Poor old Sqroot, probably a nice guy but has shit for brains like all those who believe whatever they are told to believe – poor old Sqroot.

  • http://Anonymousnoreply@blogger.com Anonymous

    " [...] anyone advocating for war to help our economy is mistaken."It is those who want to help the economy who are mistaken.The very idea that "Growth and Jobs" leads to "Prosperity" is ducking the problem with yet another silly slogan-ism.The economy is not the problem.The problem is that all the growth and jobs of the past have all had a negative effect upon the overall, long-term -human condition.We can go anywhere and examine any of the great centers of American prosperity, and only come away with but one impression, which is-What the f—? This place looks like a crime scene.If you're counting crimes against humanity, they are crimes scenes too.If the -end game- is improving the human condition, at this point in history the only possible route toward that end -is to put a roadblock up every time someone starts saying, "Down this road, there will be growth, jobs, prosperity and a good economy."We have had enough of that approach. It always leads to greater poverty, recessions and depressions -and war.That's the best measure of the human condition everyone is wailing about. And, it isn't a measure of the economy at all.It is a measure of the value of the idiotic approach of seeking growth, jobs and a good economy.Forget that approach.Instead -take an inventory of the mistakes of the past. Declare war on those mistakes. There are certainly enough of those mistakes to ensure identifying them shouldn't be much of a problem. But, -have no doubt- it will take real leadership to address those problems.This won't be like printing up a bunch of money to throw at -the banks, -extending unemployment benefits, -food stamps, -propping up the auto industry -or- -more thoroughly padding the silk-lined pockets of those working the health care scam.Nope, -getting rid of -and- really addressing the idiotic mistakes of the past requires real leadership, not just getting elected Mr. Smileyface pledging End-the War, Jobs, Growth and Prosperity.Didn't anyone ever notice how the Homecoming King and Queen usually end up a couple of self-indulgently nefarious, over-sexed, social-climbers?Bingo. You know who I am talking about.

  • http://Anonymousnoreply@blogger.com Anonymous

    Bullshit is easy to type.Taking care of shit is another matter entirely.U-Shit and so do I. We all shit.I shit once or twice a day. How many times for you.Regardless, I heard rumor regarding starting a war, and I wonder as a citizen, what would "Washington" have done. I don't think he really cared for war, but he sure knew how to wage it. Thank goodness for that.I prefer peace.

  • http://Anonymousnoreply@blogger.com Anonymous

    So sad that my last comment didn't post, or maybe there is a long review time here.I'm happy to give the benefit of the doubt, but Washingtion in times of war had to take the initiative even if he wasn't certain.Such are the travails of war.

  • http://Anonymousnoreply@blogger.com Anonymous

    Wars also cause inflation. There is good correlation between the spending ramp up for war and the inflation in the domestic economy later.

  • http://Anonymousnoreply@blogger.com Anonymous

    I know I'm posting this anonymously, but I posted two anonymous posts above, and I would like to apologize for some of the crude language that I used…I just get so upset when I see other trying to benefit from war – are they crazy? Yes. Are they demented? For sure. Do they have children – I do, and so I just can't understand what they are thinking….

  • http://Anonymousnoreply@blogger.com Anonymous

    we've been in two ongoing wars for years. the military industrial complex doesn't stimulate the economy as much as it used to. it just takes rakes in profits for a select few.

  • http://Anonymousnoreply@blogger.com Anonymous

    If the USA was to bomb VW, BMW, Mercedes-Benz, Toyota, Mitsubishi etc. etc. into the stone-age, then perhaps GM could find its feet? A new age of prosperity!

  • http://Anonymousnoreply@blogger.com Anonymous

    A protracted war against China would do nicely.

  • http://Anonymousnoreply@blogger.com Anonymous

    The US came out of WWII in better shape because our economic competitors were turned into heaps of rubble. Europe and Japan didn't get back to full speed for 30 years. It might be that some in the US gov't will seek war with our creditors as a way of cancelling our debt.

  • http://Anonymousnoreply@blogger.com Anonymous

    Well if there is to be a war, let it be an economic one and not a military one.That would be an improvement – evolutionarily speaking sort of…….s in s out.The blog is mightier than the sword….(for old times sake…..so to speak).Hey – I like this blog and I won't post anonymously again.

  • http://www.peoplesproclamation.com/ Ken Hausle

    testing, testing.An economic will be won by those with the most wit combined with the most humility.A mean combination.testing. testing

  • http://Anonymousnoreply@blogger.com Anonymous

    I think we are beyound the time that waging a war would stimulate economy. The implications of a war, unlike old time, will not be limited in a local sence. Humanity is too connected in a verities of conceptual aspect. When we talk about such a war, we are talking globa.

  • http://Anonymousnoreply@blogger.com Anonymous

    Why not try to change the cukture of consumerism?! Even the mention of such a "remedy" as war as a possible economic stimulant is appaling. It's indicative of a morbi cukture. Let's assume that America finds a weak country, bombs it and dodge this recession, what about the next one? Didn't Regan do that in the 80s with Granada and Panama?! Regan is adored for being a "strong" leader while Carter who actually tried to fix what's wrong with America ( by proposing plans for reductionin oil dependancy and a closer oversight on wall street and finicials) was dismissed as "weak." As long as Americans want to be told what they like to hear such as "go out and shop to defeat terrorism" the consumerism furnace will be in desperate need for fuel!

  • http://esinoreply@blogger.com esi

    it's more similar to ahmadinejad's Bull shits

  • http://kjh-es.com/index.html Ken Hausle

    I would like to put out a big "thank-you" for this blog. In my opinion, it is one of the best on the internet for a "citizen". I appreciate this blog.Thank-you again,Ken Hausle

  • http://peoples.proclamation.com Ken Hausle

    Um esi, you know what you just said above is trivial don't you…..if you don't, then I know more about you that you do about me.

  • http://www.peoplesproclamation.com/ Ken Hausle

    I think I will post on this thread one more time because my last post I put an incorrect link on my name…..I'll try to get it correct this time.Anyhow, there is war and then there is war. No matter what type of war there is, war causes suffering of innocence, and this is what I just don't get. Makes no sense to me.So this suggest to me that a penny in the hand is better than one in the bank, but generally speaking this get unreasonable after awhile and just turns you into a target, so given that, it is important to decide what has value and what does not and then to put all of your energy and effort into that.I will say again that I appreciate this blog and even though IE plays some "odd games" sometimes when I try to load the Washington Blog page, I don't care. I just click refresh and it seems to work.I can't say the same about many authorities these days. They seem to never refresh. Just the same-old same-old. As if they are addicted to the status quo, and let me tell you – this is a DEAD end road.Seems obvious to me, and this is not a trivial post so I hope it makes it through because it is my last post to this blog and I'm not kidding.Hope, Remedy, Peace – in that order.Plus – I support the Impeachment of Barack Obama because he just send 30,000 marines into a quagmire, which suggest to me that he know nothing about history.Best I know the last group to prevail in attacking Afghanistan was the Mongols, and how did it go for them. Furthermore, if going to Afghanistan is just a ruse to get in the "middle of it all" and be close to Iran, then I say this is a fools game. A huge waste of funds at a minimum and the end of an emipire as a distinct possiblility.Sad but true best I can tell.So with that said, I sure hope "we" can evolve into something better.Peace,Ken

  • http://pennypincherpersonalfinance.blogspot.com Penny Pincher

    I just don’t see how buying a bunch of expensive weapons, only to blow them up so you can blow stuff up, benefits any economy. Because then even if you win you have to pay to fix the stuff you blew up, and you don’t have the stuff you used to blow it up with anymore either, so even more of the earth’s resources go to fixing the shit you blew up. So how does this improve the bottom line? All it does is line the pockets of the people who make weapons.

 

 

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