| classicman |
01-14-2008 10:51 PM |
Historic effects of war on the United States economy
Quote:
In order to get a proper perspective, let us first view an article
that provides us with an overview of the effects of war on a nations
economy and also pick up some answers to our questions. It mentions
that the bad effects of war could be seen in the vast amounts of
expenditure, disruption to trade, and loss of human and material
capital plus inflationary pressures.
Also taking into account, wars (if you win) can also provide positive
effects to an economy. It can stimulate economic activity by creating
jobs, improve current technology for future commercial benefit and
increase capacity utilization.
Such effects can have different consequences for a superpower economy
like the United States.
“At certain historical times and places, war can stimulate a national
economy in the short term. During slack economic times, such as the
Great Depression of the 1930s, military spending and war mobilization
can increase capacity utilization, reduce unemployment (through
conscription), and generally induce patriotic citizens to work harder
for less compensation.”
“In the 1990s, the GPS navigation system, created for U.S. military
use, found wide commercial use. Although these war-related innovations
had positive economic effects, it is unclear whether the same money
spent in civilian sectors might have produced even greater
innovation.”
“In recent centuries, the largest great-power wars have been won by
ocean-going, trading nations whose economic style differs sharply from
that of land-based empires. Rather than administer conquered
territories, these "hegemons" allow nations to control their own
economies and to trade fairly freely with each other. This free trade
ultimately benefitted hegemons as advanced producers who sought
worldwide export markets. The Netherlands after the Thirty Years' War
(1648), Britain after the Napoleonic Wars (1815), and the United
States after the World Wars (1945) each enjoyed predominance in world
trade. By virtue of superior naval military power, each of these great
powers shaped (and to some extent enforced) the rules and norms for
the international economy. For example, the international financial
institutions of the Bretton Woods system grew out of U.S. predominance
after World War II.”
“War and Economic History”
Joshua S. Goldstein
http://www.joshuagoldstein.com/jgeconhi.htm
Since our focus is the United States, it would be an injustice to the
discussion if we do not include citations that include the latter part
of the 19th century wherein the US actually started becoming a
military and economic power. In the article “Expanding Empire”, it
provides an extensive commentary on how the US uses war for economic
expansion that eventually benefited the American economy in the long
term.
“The first real foreign war of the United States—the Spanish American
War—took place almost simultaneously with the first real expansion in
U.S. foreign investment. And that is the real secret of understanding
that war, as it is of understanding all subsequent U.S. wars.”
“It was precisely in the 1890s that investment abroad—that is, the
export of U.S. capital—took place on any substantial scale. And in
1897, just before the Spanish-American War, there were still "only"
700 million U.S. dollars invested abroad. By 1914, the foreign
holdings had leaped to $3.5 billion—five times as much. Without the
war, this could not have happened.”
“The war with Spain was motivated by the desire to exploit Cuba,
Puerto Rico, the rest of Latin America and the Philippines, etc., and
to get complete control of the Caribbean so as to facilitate the U.S.
control of the contemplated Panama Canal and open up easier access to
business expansion in Asia. It was a question of economic expansion
and pretty much understood and openly explained as such at the time.”
This extensive document stretches to 12 web pages and mainly states
its case that the US involvement in the Philippines, Korean and
Vietnam wars were all for the sake of economic expansion. It shows
that different business segments from the auto to the retail
industries benefited from such wars.
“Expanding Empire”
http://www.workers.org/cm/empire1.html
It is however in the argument for economic stimulation that observers
view as the more acceptable instigators when the US government goes to
war. This article form the Business Week website shows how the US has
been becoming more efficient in the use of its resources during times
of war which leads to greater profit.
“If we consider World War II, Korea, and Vietnam, we have examples of
large, medium, and small wars. In World War II, peak military spending
in 1944 was 60% to 70% of prewar gross domestic product. During the
Korean War, spending peaked at around 11% of GDP in 1952, and during
the Vietnam War, it peaked at about 2% of GDP in 1968.”
“The economic effect of the Gulf War is harder to isolate because
military spending rose by only about 0.3% of GDP. The economy was in a
recession in 1990, before the war started in January, 1991. Economic
growth resumed by the second quarter of 1991 but remained low until
1992. The analysis from the other three wars suggests that little of
the recovery stemmed from the Gulf War.”
“Not all aspects of wars are favorable to economic activity, of
course. Consumers' perceived increased risk of flying, for example,
lowers the demand for air travel, and the perceived higher risk of
terrorism likely reduces business investment. However, negative
effects were also present in previous wars, including worries about
Japanese invasion of the U.S. mainland during World War II and about
Soviet missiles during the cold war. Nevertheless, the net effects of
previous wars on U.S. GDP turned out to be positive.”
“Why the War against Terror Will Boost the Economy”
http://www.businessweek.com/magazine...5/b3756038.htm
Now let us see the perspectives of those from a different side and
view that such arguments are impractical and do not resemble the
reality of the economic consequences of war.
Such is the dilemma of the US should it push for a war against Iraq.
“Today, we know that this is nonsense. The 1990s boom showed that
peace is economically far better than war. The Gulf war of 1991
demonstrated that wars can actually be bad for an economy. That
conflict contributed mightily to the onset of the recession of 1991
(which was probably the key factor in denying the first President Bush
re-election in 1992).”
“Whichever way one looks at it, the economic effects of war with Iraq
will not be good. Markets loathe uncertainty and volatility. War, and
anticipation of war, bring both. We should be prepared for them.”
“The myth of the war economy “
http://www.guardian.co.uk/Print/0,3858,4588495,00.html
“'In previous periods when the U.S. has been involved in war, what you
typically end up with is an artificially propped up economy followed
by a decline in economic activity when the war is over,’ said
economist Patty Silverstein of Littleton-based Development Research
Partners.”
“'War is a wonderfully inflationary pressure on the economy,’ added
Tom Clark, director of the Jefferson Economic Council in Jefferson
County. ‘It's a wonderfully nonproductive use of assets, usually
followed by a period of hyper-inflation.’”
“Iraq war could hurt local economy”
http://www.bizjournals.com/denver/st...21/story1.html
I also found other articles that may help you since these ones are
additional discussions on the merits and negative effects of the
participation of the US in a war.
“Relationship Between 20th Century Money and 20th Century Wars”
http://heily.com/mark/wizards/wizards-html/node26.html
“The Economics of War”
http://www.cato.org/dailys/12-04-02.html
“Interventionism 101 - New US Military Bases: Side Effects or Causes
of War?”
http://www.theexperiment.org/articles.php?news_id=1808
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