War is a great way to destroy things, but it's a terrible way to grow an economy.
What is often overlooked is that war creates hardship, and not just for those who endure the violence. Yes, US production increased during the Second World War, but very little of that was of use to anyone but soldiers. Consumers can't use a bomber to take a family vacation.
The goal of an economy is to raise living standards. During the War, as productive output was diverted to the front, consumer goods were rationed back home and living standards fell. While it's easy to see the numerical results of wartime spending, it is much harder to see the civilian cutbacks that enabled it.
The truth is that we cannot spend our way out of our current crisis, no matter how great a spectacle we create. Even if we spent on infrastructure rather than war, we would still have no means to fund it, and there would still be no guarantee that the economy would grow as a result.
What we need is more savings, more free enterprise, more production, and a return of American competitiveness in the global economy. Yes, we need Rosie the Riveter – but this time she has to work in the private sector making things that don't explode. To do this, we need less government spending, not more.
Wednesday, July 21, 2010
War Does Not Fix an Economy
Peter Schiff writes: