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The True Costs of War
May 26, 2014 in Economics
By Matt McCaffrey
Memorial Day provides as good an opportunity as any to reflect on the horrendous and irreversible costs of war. For most people—and rightly so—the clearest costs are those in terms of human life, which is shattered both physically and psychologically. As John Denson writes, "In looking at the costs of war we must always keep in mind the reality experienced by soldiers in actual combat. The tallies of the dead and wounded soldiers cannot carry the full meaning of the terror of actually experiencing war… [and] the very real horror and violence known by those on the front lines who actually do the fighting." The destruction of life, civilian and soldier, is usually the goal and always the result of warfare in any age.
Yet in addition to the human costs, which are themselves staggering, there are others as well. Denson further explains:
In the war-torn [21st] century, we rarely hear that one of the main costs of war is a long-term loss of liberty to winners and losers alike. There are the obvious and direct costs of the number of dead and wounded soldiers, but rarely do we hear about the lifetime struggles of combat veterans to live with their nightmares and injuries. Nor do we hear much about the long-term hidden costs of inflation, debts, and taxes. Other inevitable long-term costs of war which are not immediately obvious are damages caused to our culture, to our morality, and to civilization in general.
As writers like Bastiat and Hazlitt emphasized, economists must be careful to examine all costs, not just the most obvious ones. When we do that, we begin to understand the scale of the destruction that war inflicts on human societies. This is true even for the "winners"; no matter which side is deemed the champion, all victories are pyrrhic victories. As Sun Tzu stated many centuries ago, "No country has ever profited from protracted warfare." Mises was even blunter: "War prosperity is like the prosperity that an earthquake or a plague brings."
There is much more that could be said about the economic costs of war making. Let me suggest a few readings to anyone interested. For an introduction to basic economic thinking about warfare, see a trilogy of articles surveying Austrian writings on the subject (here, here, and here). Joe Salerno has added to the foundations of the early Austrians by developing …read more
The End of Shopping as Entertainment in America
In America, Memorial Day weekend (like Labor Day weekend) means big sales at most major US retailers. But the credit-fueled consumer frenzy of the early 2000s has come to a screeching halt, reports The Market Oracle:
The pundits, politicians and delusional retail CEOs continue to await the revival of retail sales as if reality doesn't exist. The 1 million retail stores, 109,000 shopping centers, and nearly 15 billion square feet of retail space for an aging, increasingly impoverished, and savings poor populace might be a tad too much and will require a slight downsizing – say 3 or 4 billion square feet. Considering the debt fueled frenzy from 2000 through 2008 added 2.7 billion square feet to our suburban sprawl concrete landscape, a divestiture of that foolish investment will be the floor. If you think there are a lot of SPACE AVAILABLE signs dotting the countryside, you ain't seen nothing yet. The mega-chains have already halted all expansion. That was the first step. The weaker players like Radio Shack, Sears, Family Dollar, Coldwater Creek, Staples, Barnes & Noble, Blockbuster and dozens of others are already closing stores by the hundreds. Thousands more will follow.
One thing every responsible parent tries to teach children is the difference between need and want. American consumers may be forced to digest this lesson simply because they're running out of money and credit. Shopping may no longer be a weekend diversion, or a form of ersatz therapy.
Of course dead malls have been with us for some time. But the horrific bust created by the Fed's unholy and artificial boom will endure for decades to come, in the form of rotting strip malls and ghostly, never-rented office parks.
Inside Venice's Secession Movement
Paolo Bernardini speaks with the Mises Institute about his involvement in the Venetian secession movement in today's Mises Daily:
MI: How do you imagine a new Venetian state would interact with the overall European community?
PB: A tiny majority of Veneto people are in favor both of the EU and of the Euro as a currency. So I envisage a little, rich state, playing a major economic and political role in the EU, a stabilizing role. It will interact naturally with other rich and similar states, Bavaria (still part of Germany), Austria, and the Netherlands. It will be a Finland in the Adriatic. In general, however, new little states entering the EU in a position of economic privilege (Scotland, Catalonia, Veneto) should also be able to recondition the EU policies and even its nature.
Financial Tyranny against Political Enemies
By Richard W. Rahn
Richard W. Rahn
If you were a political leader who wanted to control the population, but wanted to do it without using brute force, how would you do it? The answer: control how individuals and businesses spend their money by controlling their bank and other financial accounts. The Obama administration has set up a program to do just that, called "Operation Choke Point."
If the government can prevent you from spending your money on legal products and information services it does not like, it soon has control over much of your life. You might be thinking this could not happen in America, but it is. Increasingly, businesses and individuals engaged in legal activities are having their banking relationships severed because people within the Obama administration and some politicians do not like the particular activity.
"The feds hobble their critics by choking off their banking privileges."
In the modern age, it is almost impossible to operate without a bank account and making electronic payments directly or through a credit card company. Banks and other financial service firms, including payment processors, are very heavily regulated by the government. Also, the U.S. Treasury can label any bank in the world as a "bad bank," which means that other banks are, in essence, prohibited from having corresponding banking relationships with the "bad bank." Banks need to have accounts with other banks for the interbank payment system to work. Typically, small banks have such corresponding relationships with big banks, and the big banks have accounts at the Federal Reserve Bank — the ultimate bank. In sum, banks cannot function without corresponding banking relations, and the government sets the rules for these relationships.
Last year, the Justice Department started Operation Choke Point, which placed massive paperwork and information burdens on banks and money-payments firms that were servicing legal businesses that the administration doesn't like, such as payday lenders, adult entertainment, and gun and ammo dealers. In addition, the Internal Revenue Service and Treasury Department came up with new rules for most financial-services companies (including banks) on the globe that may provide financial services to American citizens and so-called American "tax persons," such as green-card holders. The excuse for these new rules was that some Americans were not paying the full income tax due on their foreign accounts. The fact is, the compliance costs of the new rules on the global financial system will be many times the projected revenue from the …read more
How the European Union Corrupted Eastern Europe
By Dalibor Rohac
Thanks to the funding from the European Union (EU), the countries of Eastern Europe are an increasingly attractive destination for cyclists. In the Czech Republic, hundreds of millions of Euros, predominantly from EU's structural funds, have been used to create a network of some 25 thousand miles of cycling trails. In Slovakia's Northern region of Orava, a brand new network of 155 miles of cycling trails set in a picturesque countryside connect the local villages with those in neighboring Poland.
While a boon for cyclists, the inflow of EU money into Eastern Europe is playing a more questionable role in narrowing the gap that new member states in Eastern Europe and the more affluent parts of the EU. Critics of development aid, such as William Easterly of New York University, have long argued that foreign aid directed to badly governed countries in the developing world can worsen corruption and cronyism, and foster authoritarian rule. Although the magnitude of the problem is different, EU funds are exercising a similarly nefarious effect on governance and politics in Eastern Europe.
"The inflow of EU money into Eastern Europe is playing a questionable role in narrowing the gap that new member states in Eastern Europe and the more affluent parts of the EU."
Between 2014 and 2020, the EU is planning to spend over €350 billion to help narrow the disparities between member states. It does so through several 'funds': the European Regional Development Fund, which is the largest of them and which supports the building of infrastructure and job-creation; the European Social Fund, which purports to help the unemployed and the disadvantaged, mostly by providing training programs; and the Cohesion Fund, which was set up in 1994 to provide funding to the poorest member states.
The inflow of EU money into new member states has been estimated at around 4 percent of their GDP. It is not a free lunch, however. European countries are co-financing the projects and provide the bulk of the administrative support to the program. Slovakia's Institute of Economic and Social Analyses (INESS) estimated in 2011 that each euro coming from EU's structural funds is matched by up to 90 cents coming from the national budget.
The economic effects of such aid are not obvious. Even if one believes that the inflow of funds helps stimulate aggregate demand, "it is unclear whether the EU funds are crowding out …read more