The Lack of Major Wars May Be Hurting Economic Growth [NY Times]

SpacePete · Jun 15, 2014

The Lack of Major Wars May Be Hurting Economic Growth

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.
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http://www.nytimes.com/2014/06/14/u...wars-may-be-hurting-economic-growth.html?_r=0

SpacePete · Jun 15, 2014

More from the same artice:

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.)
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The War and Gold book sounds interesting:

The title's implications aside, this is really a history of moneythoroughly satisfying and remarkably accessible. Aiming to explain today's international financial turmoil, British historian and Conservative MP Kwarteng (Ghosts of Empire: Britain's Legacies in the Modern World) begins with Spain's conquest of America and its resultant bonanza of gold and silver. This bullion allowed governments to pay for wars and bolstered the European nation-state, yet it also fostered inflation, deficits, and a vast expansion of paper moneythe three sins of classical economics. Centuries of financial bedlam paused during the Victorian era of gold-based stable currency and balanced budgets, but two ruinous world wars resurrected deficits and unprecedented government spending. The 1944 Bretton Woods Agreement revived gold-based discipline, but its end in 1971 led to an explosion of credit, easy money, financial chicanery, the rise of Japan and the European Union(, the spectacular transformation of China, and the continued, if shaky, domination of a pugnacious, free-spending America and its dollar. While John Kenneth Galbraith's 1975 Money: Whence it Came, Where It Went remains the subject's touchstone, Kwarteng superbly brings that volume up to date in explaining the almost unexplainable.
http://www.publishersweekly.com/978-1-58648-768-3
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sammysilver · Jun 15, 2014

Let's invade NZ, Fiji, and the rest of the islands!

Think of the size of the Wallaby front row.

SpacePete · Jun 15, 2014

sammysilver said:

Let's invade NZ, Fiji, and the rest of the islands!

Think of the size of the Wallaby front row.
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Just the thought of losing to those New Zealanders might be enough to pass the budget, restore funding to science and unite the people behind our glorious new leader... as the article states: "...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."

So stop blaming Labour and start blaming New Zealand. Problem solved!

SpacePete · Jun 15, 2014

The author of one of the books mentioned in the article has a talk on youtube on the topic:

[youtube]http://www.youtube.com/watch?v=ebRpquKFSEw[/youtube]

Caput Lupinum · Jun 15, 2014

Beating up New Zealand would be like beating up a re-tard. It would do nothing for Australia's global reputation and just make us look like tryhards.

JulieW · Jun 15, 2014

Caput Lupinum said:

Beating up New Zealand would be like beating up a re-tard. It would do nothing for Australia's global reputation and just make us look like tryhards.
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More than joining the Coalition of the Willing you mean?
:lol:

solved · Jun 15, 2014

Beating up New Zealand would be like beating up a re-tard. It would do nothing for Australia's global reputation and just make us look like tryhards.
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That's why we would firstly send out false media reports of their government committing tyrannic acts upon their people. Upon which there would be a war to save the people and put Aussie friendly leaders in charge to ensure that the profits of Aussie corporations are secured and increased.

sammysilver · Jun 15, 2014

Ha ha, I have dual ANZ citizenship, I'll have to give myself an uppercut!

Old Codger · Jun 15, 2014

Trouble is, if we go to war against NZ we may end up being called 'West Island'.

Fierce buggers them Kiwis!

OC

Old Codger · Jun 15, 2014

Anyway, I thought DEBT was the problem, not war or lack of it?

stupid pollies spend too much effing money!

JMO

OC

SpacePete · Jun 15, 2014

Old Codger said:

Anyway, I thought DEBT was the problem, not war or lack of it?

stupid pollies spend too much effing money!

JMO

OC
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Spot on OC. In one of the quoted paragraphs above, there is a similar concern by the guy authored Gold and Money: "...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."

mmm....shiney! · Jun 15, 2014

[youtube]http://www.youtube.com/watch?v=773aoMo7hPE[/youtube]

JulieW · Jun 15, 2014

Getting back to the original post.

1. Approximately half of humans time on earth has been at war with each other.

2. War kills economies as well as people. Economic growth comes from supplying the tools of war and the supplies and rebuilding materials to the poor people who've just been warring.

3. NY Times 'toilet paper of record' - why is it putting false propaganda like this out for its readership?

SpacePete · Jun 15, 2014

JulieW said:

Getting back to the original post.

1. Approximately half of humans time on earth has been at war with each other.

2. War kills economies as well as people. Economic growth comes from supplying the tools of war and the supplies and rebuilding materials to the poor people who've just been warring.

3. NY Times 'toilet paper of record' - why is it putting false propaganda like this out for its readership?
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Did you read some of the closing paragraphs?

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.
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JulieW · Jun 15, 2014

I think suggesting that the slowed down economies of the world are preferable to a greater war machined growth, is a sly way of suggesting to the moronic other half, that a good war or two will bring back economic prosperity to a depression world.

alor · Jun 15, 2014

it is the lack of blood sacrifice and blood on the streets, is the way to say lack of majors wars to boost the war machine.

Clawhammer · Jun 15, 2014

Its the old "broken windows" fallacy. If 1 broken window caused by a kid throwing a stone can create economic activity, then logically 2 broken windows would be twice as good. And by extension, lets break all the shop windows... then burn down the shop itself... then demolish the whole city...

That's what war does... redirect valuable capital away from building something new to rebuilding things we already have.

AngloSaxon · Jun 15, 2014

I'd like to point out war is a human condition. It has always been with us and will always be with us. From the first disagreement before fire was invented to the exploration of the galaxy. War will be with us.

JulieW · Jun 15, 2014

That 1000 years of peace is a bit elusive then!

Unfortunately you're probably right.

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