Monday, 30 November 2009

War, what is it good for?

[I continue to work at my education ... 'Economics in One Lesson' by Henry Hazlitt)
Chapter 3 - The Blessings of Destruction

From my brief brush with the warfare of the 16th & 17th Centuries (not a first hand experience admitedly) I would agree with Hazlitt that often this line is taken in assessing warfare:
They (economics professors ... or we could add, professional historians) tell us how much better off economically we all are in war than in peace. They see 'miracles of production' which it requires a war to achieve. And they see a world made prosperous by an enormous 'accumulated' or 'backed up' demand (p25)
But this is merely the Ch 2 fallacy 'in new clothing and grown fat beyond recognition'.

It also is a view that confuses need and demand. Need is not demand. Because effective economic demand requires not merely need but corresponding purchasing power. Ask the average 16 year old about that one!

And purchasing power is NOT JUST MONEY. Printing off the readies just reduces their value ... and that falling value can be measured in the rising prices of commodities.

This chapter includes a great line that summarises the chapter nicely:
No man burns down his own house on the theory that the need to rebuild it will stimulate his energies. (p27)
Why would we even begin to think this would be the right way to evaluate the great wars and the economic whirlpools & eddies surrounding them?
Many of the most frequent fallacies in economic reasoning come from the propensity, to think in terms of an abstraction - the collectivity, the 'nation' - and to forget or ignore the individuals who make it up and give it meaning. No one could think that the destruction of war was an economic advantage who began by thinking first of all of the people whose property was destroyed.
Presumably we could add lives into that too.

War destroys accumulated capital.

His conclusion:
There may be, it is true, offsetting factors. Technological discoveries and advances during a war may, for example, increase individual or national productivity at this point or that, and there may eventually be a net increase in overall productivity. ... But such complications should not divert us from recognizing the basic truth that the wanton destruction of anything of real value is always a net loss, a misfortune, or a disaster, and whatever the offsetting considerations in a particular instance, can never be, on net balance, a boon or a blessing.

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