Wars Really Are Bad for Economies

via Tapped, we find Joe Stiglitz is still trying to remind everyone that the war in Iraq is going to be really, really expensive:

he issue is: $1 trillion or $2 trillion is a lot of money. If our objective is to have stability in the Middle East, secure oil, or extend democracy, you can do a lot of democracy buying for this sum. To put it in context: The whole world spends $50 billion a year on foreign aid. So what we're talking about is multiplying the foreign aid budget 20-fold. Wouldn't you say this could do more for peace and stability and security?

Later in the interview, the reporter from Der Spiegel repeats an old lie:

SPIEGEL: There is an old saying: War is good for the economy.

Stiglitz: Listen, World War II was really unusual, because America was in the Great Depression before. So the war did help the US economy to get securely out of this decline. This time, the war is bad for the economy in both the short and long run. We could have spent trillions in research or education instead. This would have led to future productivity increases.

It's bizarre that so many people should believe this. Korea and Vietnam were both objectively bad for the economy, and Iraq 1 certainly didn't get the US out of it's recession. World War I, and the peace that followed caused a harsh recession that basically didn't end in some countries until the next war.

War are not good for the economy. There's no evidence of it. The things that governments buy during wartime - guns, planes, tanks, etc. - have almost no conceivable use in the peacetime economy. In times of peace, they're likely to just sit on the bases, contributing nothing to the economy. Of course, in times of war they have a far more negative impact on the enemy's economy.

What wars are good for is getting governments to spend lots of money while avoiding a lot of political debate - we must support out troops, after all. But as Stiglitz rightly notes, if we want to encourage economic growth, we should take all the money we spend on wars and simply spend it on civilian purposes like R&D or scholarships or something. Of course, that would be socialism.

But just so we're clear: Spending $$$ on wars and killing: Bad.

Spending $$$ on non-killing pursuits: Better.

What's interesting is that even the people whose jobs depend on these pursuits tend to understand this. If you read Angle of Attack, a book about the engineers behind the Apollo Program, you find a few interesting facts. First, the men who designed the Saturn V rockets and the capsules they launched ruined their lives building those things. Heart attacks, divorces, strokes, ulcers were all common. Secondly, somewhere between 1/4 to 1/3 of the labour needed to make these things was never charged to the US government - it was volunteered.

Why should that be? Well, that's #3: These guys desperately wanted to build something that wouldn't end up killing people. During the 1950s and 60s, it was basically impossible to be an aerospace worker without spending some time building weapons of war. These guys all had built things to destroy, and were under no illusions as to what that meant. So when the Apollo Program came along, and it finally became possible to use their knowledge and training to both help their country and do something that didn't involve killing, men jumped at the chance.