Monday, October 23, 2006

War is good for the economy?

I have returned to this debate more than once, and this weekend appeared to be when everyone rose the question. Why, I do not have the slightest idea, but the question was asked... er the statement was made. "War is good for the economy".

Their points?
  1. That war creates more jobs
  2. More jobs mean more families with an income
  3. More income means more money is spent
  4. The money spent creates more jobs
Cute thought and true, although the market model that they are viewing is incomplete.

Who is the main consumer during times of war? The government.
Who has raised the amount purchased? The government.
If you begin to spend more than you have what do you do? Work more to raise income.
What does government do to spend more? Usually raise taxes.
(I leave it at this point, but today the government does not increase income while increasing spending which causes a higher deficit. This is able to be done under a fiat system. One of the many arguements against it, but for my point I will leave it at raising taxes.)

Therefore, citizens receive jobs to gain income to support their family, yet their taxes are increased taking away from the income for their family. The new jobs do not neccessarily help the citizens, but did increase the amount of revenue the government received.

It returns to the same arguement as government subsidies. The government taxes all citizens and gives a subsidy to farmers to not grow as much of a product. The overbundance of the product is disposed of rather than sold. In World War II, excess military equipment was disposed in order to maintain the high level of employment for the citizens. Thus, citizens work and accomplish nothing. A return to Sisphysm, which I spoke of before. A time of full employment, but never having anything to show for it. The citizens work hard; are taxed taking from their own income; the tax is used to purchase the goods they made, but then the good is disposed of just to keep them employed. Is this really efficient? And we haven't even begun to discuss the loss of citizens who are underpaid fighting in the war...


Anonymous said...

It is a pretty ridiculous argument.

The fiat system is really a way for us to steal productivity from other countries. We're never going to repay our debts. We'll engineer the collapse of the dollar and make a new one at an exchange rate of our choosing before we pay back these trillions of dollars.

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Idunois said...

Thank you admin for the interesting read, but I am lost at why you are writing this here? Did I offend you or did am I misinforming the blogging community? In any case, it was interesting unfortunate there is so much material and little time.

Anon 12:59
I don't even want to write alot of blogs about fiat money. Its almost pointless as it changes nothing unless we can convince those in power who mostly love fiat money since it allows them more power

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It's worth knowing. Even if we cannot change something, it's worth understanding so we can paint a clearer picture for ourselves, and understand what's really going on.