War economics; how does it work ?

[Externet]

Hi.

In simple and superficial terms, those huge cost$ from Afghanistan and Irak operations, where does the money ends ?

Is all the salaries of military personnel ending in USA citizens pockets?

The war machinery aircraft, battleships, war tanks, trucks... made in USA, ends in USA contractors, factories, workers pockets ?

Weaponry, ammunition, made in USA, ends in USA factories profits ? I do not think they are imported from China... yet.

The suply chain for food, equipment, transportation, construction of facilities, varied services for the armed forces, ends in USA nationals commercial operators ?

With the exception of fuel to run machinery overseas, and perhaps some small local war zone expenses, labor, translators, etc; is the war economics staying in USA pockets ?

 

Is all the noise about how the USA funds are depleted from these wars mostly noise ?

[Nex6]

by tradition war, is *sometimes* very good for economy's. but, fighting two wars on two fronts for long periods of time is not. also, modern economy's are very integrated. so the money generally does not all end up in only the US. it gets spread out probably pretty far.

 

in WW2, we rampt up manufacturing by factors of 10. which helped our economy greatly. but today, our manufacturing is pretty limited. and even then, some stuff still gets made or prefabed over seas.

 

so, today while the money may go to a US company that company may "pay" for stuff from china, india etc. which also helps there economy's.....

[ecoli]

I say bs. War, by itself is rarely good for an economy... if you want to jumpstart manufacturing it would be better to run deficits to build up plants, make random things and destroy them (though I don't really like this idea either), rather than making guns and tanks and sending the most productive members of society overseas to die (in addition to destroying productive output).

 

Sometimes war is necessary, but not to jumpstart an economy.

 

in economics terms, this is called the broken window fallacy

 

War does motivate innovation, though I hardly think that's a justification.

Edited July 7, 2010 by ecoli

[Nex6]

Thats not what I meant..

 

and, I never said war was good. only that, by tradition sometimes it helps the economy. not even that, thats the best way to do it. thats not what I was referring...

[Marat]

Since the economies of all the world's developed nations are now thoroughly interconnected by globalization and international finance capital, it is extremely difficult to identify any one point in the economic spectrum and say the benefit of X has landed here at Y. The benefit of X may stimulate economy Z, but X may be owned by company A, which uses the profits made to make loans to nation B, which invests the money to develop country C, which sees its standard of development increase, so it can then compete with and undercut the export economy of country Z, so a cycle is created. So where does the benefit of the initial investment go or not go?

 

Generally, spending money on a war is an extremely poor investment, since all the hardware purchased tends to be unproductive. A $10,000,000 tank never does anything except wreck infrastructure and kill people, while a $10,000,000 school, hospital, or factory continues to generate productive resources for decades into the future. The soldiers employed in a war also fail to generate capital, unless you count death as capital, but if they had been working in a factory, they might well have made useful, productive things. This consumption of resources in non-productive activities fuels inflation since for all the investment money flowing around there are no new products to absorb it, and this leads to yet further problems. Of course it is theoretically possible to steal another country's resources in war, and in this sense military investments might be profitable, but with the increase in fire power in World War I, wars became too damaging and costly to turn a profit, so that motive disappears as well.

[ewmon]

Is all the noise about how the USA funds are depleted from these wars mostly noise ?

Depending on the war, much of the funding of a war circulates back through the American economy. Most of the cost of war equipment is "value-added" by workers, and even raw materials must be obtained by workers; however, that equipment can only wage war.

 

Through war, we gain national security, which is not very tangible and difficult to quantify if we're not fending off invaders from our shores. We also gain sorrow, broken hearts, divorces, sleepless nights, PTSD cases, homeless people, psych ward patients, lost wages, and mountains of medical expenses.

 

We lose lives and limbs, wage-earners and parents, etc. We also lose all those assets consumed, destroyed, lost or stolen in the prosecution of the war, or left/abandoned/given to foreign countries to help with their rebuilding, or destroyed for various reasons (security, excess, etc), etc.

 

So, a lot of people wonder about the worth of fighting a foreign war.

[Nex6]

Its much better, to invest in other tangible things such as infrastructure, R&D etc. war, is a bad investment. but, that does not mean it has no effect on the economy. and, a long war is almost always bad.

 

when, you goto "war" massive amounts of money is spent across the board. things like supplys, weapons, ammo, food, contractors. etc all get funding, also the "famliys" of the soldiers get more pay... (combat pay)

 

so, we are not saying from a moral point of view weather its good or bad, just that it has an effect.

 

it would be much better, if we spent 3 trillion on R&D and infrastructure.....

 

 

-Nex6

[Marat]

It is significant how American cost-benefit analyses of military expenditures are so completely irrational. Since America spends as much on the military as the rest of the world combined does, including America's allies, presumably America wants to be prepared in case the entire world declares war on it all at the same time. This represents a vast over-investment in protecting Americans against physical injury, economic loss, loss of political liberty, or death from enemy attack. But America grossly underinvests in protecting its citizens from every other, infinitely more real threat, such as serious disease, unemployment, environmental disasters, inadequate schooling, inadequate housing, etc.

 

The explanation lies in the profoundly irrational ideology which directs American resource allocation at the political level.

[Mr Skeptic]

Well, looting and pillaging (or "war reparations" if you want to be more diplomatic about it), could be good for the economy. It would boil down to war being the costs to produce tribute. Other than that though, war is like making a bunch of stuff, breaking it, and killing a bunch of mostly young people in the prime of their lives.

 

However, if the war encourages people to work a lot harder, than that is going to boost the economy. I suspect it can be done without war though, but you'd need a reason for the peoples to get off their lazy butts and get back to work.

 

Another thing is wars tend to cause deficit spending (ie borrowing money which goes into the economy, even if it is to be blasted to smithereens shortly afterward).

[Marat]

A major problem with war is that it is like throwing the dice on a gigantic scale. Since it is such a profound disruption of normal international relations, existing technology, society, political forces, and resources, it is impossible to predict what will happen, so making war is a fundamentally irrational enterprise, especially if done with the intention of generating some sort of economic benefit. For example, after 'winning' World War I, Britain was utterly bankrupt and lost the ability to retain its colonial empire, while Germany, as a 'reward' for 'losing' the war, had its economy modernized by the Marshall Plan so that it was able to outcompete the winners of the war. German friends of mine who came to visit me in England in the 1990s were still making comments like, "i never would have guessed England was so utterly shabby!" and much of that was still the effect of England having 'won' the war.