Discussion: Do We Really Need a War for Economic Growth?

Discussion for article #223962

“Do we need 4% growth”? I would argue we do not. It needs to be kept firmly in mind that a large part of the economicgrowth that has occurred since the industrial Revolution has been intrinsically linked to population growth. A population growing at 2%/year needs 2% GDP growth just to stay even. A stable population does not. Moreover, a growing population, dominated by a younger demographic has consistently rising demand. A stable, aging population does not. This is what we have seen in Japan and most of Europe and is what we are seeing now in the US (and to a large extent in China too). Is 2 % GDP growth in a stable, older population a bad thing? I would say that in fact it may be a good thing, particularly for poor planet Earth. Attempting to kick the engine up to 4% may not only be unfeasible, but may be undesirable if we hope to address climate change and other environmental problems.

As for Cowen, he leans conservative, but he is not dogmatic. I enjoy reading him, not just on economics, but on food as well,

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$171B for advertising is only 1% of US GDP, although it does drive inequality in the form of ridiculous Silicon Valley buyouts like $17B for WhatsApp.

Computer technology got some help from military spending, but far less than rocketry, jets, or fission power. Those are also far less profitable and useful. Also, the path of fission tech was distorted by the needs of submarines, and forced down the blind alley of light-water enriched reactors. We would have far better reactors, and probably aircraft and rockets, if they had grown in an incremental instead of force-fed manner.

I’m no economist, but I’d quibble with a few secondary points in this column. The author characterizes advertising as “waste” because it doesn’t translate into more Corn Flakes in the consumer’s breakfast bowl. However, advertising informs consumers (in a slanted way) about the marketplace. It also funds independent, non-charity-based journalism - including newspapers and TPM. Surely that has important, beneficial consequences for the rest of the economy.
Similarly, I think it’s simplistic to say all speculative costs on Wall Street are waste. Irresponsible and nauseating as the behavior of many in that sector has been, it surely facilitates capital flows that are essential to growth in a modern, developed economy. Seems to me that the real trick is to create a political and regulatory regime that will moderate Wall Street’s worst impulses.

We need government spending to spur economic growth. We don’t need spending on war to spur growth, at least from an economic standpoint. Government spending building universities and fixing and expanding transportation and energy infrastructure or spending it on a space program that pushes technology past its existing limits (i.e. doing something other than piddling around in LEO refining incremental improvements in technology we developed in the 1960s) would spur it far better than military spending.

The problem is that war ends up being the only kind of government spending that’s politically feasible because it’s the only thing that can generate political support from people who don’t believe in Keynesianism.

There is, and always has been, a broad and powerful coalition of people who reject Keynesian economics. Elites who think their excellent grasp of microeconomics makes them qualified to opine about macro issues (and whose opinions just happen to turn out to be that letting them keep all the money they make is the best thing for the economy); economists who are ideologically invested in generating alternative models of reality where Keynesian economics don’t work; and, of course, ordinary people who can’t get their heads around the fact that their experience running a household doesn’t have anything to do with running a national economy but jealously resent anyone they perceive as benefiting more from government spending than they do. The only thing that seems capable of getting those people to support the kind of spending it takes to get rapid growth is nationalism and fear.

That’s the real problem. It’s a problem that’s existed for decades and that has resisted every effort to bring people to a more enlightened understanding of their self-interest. I don’t know how to fix it, but that’s the problem.


Will kicking up the economy back to 4% growth alleviate the massive inequality we see now? Or will the one percenters just gobble up the excess via the political system they’ve rigged? Perhaps if we remove the massive, massive corruption, now endemic to our political and economic system, it would be enough even at 2%?

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Do We Really Need A War For Economic Growth?

Only in the opinion of neo-cons bent on destruction. That’s part of the reason President Cheney invaded Iraq–to boost the economy by spending on war. It’s the strategy the banks like, and it has served them well for about the last 300 years.

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Keynes wrote in the context of a terrible Depression, where the economy collapsed and GDP was shrinking at an alarming rate. Stimulating, whether through military or civilian spending, is clearly necessary in those circumstances. But when it comes to stimulating to raise GDP growth from 2% to 4%, the case is far less clear. Will that enhance QOL and human happiness or just result in more McMansions sprawling over the landscape and more carbon spewing into the atmosphere? And if we goose GDP to 4%, why not 6%? Or 8%? Where do we stop?

I’m all for spending on a long list of things we need-better infrastructure, cleaner energy, even to monitor the threat from asteroids (don’t laugh, it’s real). But we should justify these as contributing to QOL, not just to achieve some arbitrary economic number.

Follow the money.

The war we need is a War for Good Jobs. Economic growth will follow if the middle class has more money to spend and the poor have a chance to become middle class.

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We’ll said. You hit on many of the counter-points and views I share as well.

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The core issue I see is increased productivity means decreased employment unless commensurate demand balances it out. GDP has to match population levels and offset the increase in productivity with a Keynesian like spending (be it public or private) to provide the capital to the consumer at adequate levels throughout the population to generate enough demand for goods and services to provide an acceptable QOL for the entire population.

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A great many countries with somewhat lower GDP per capita have QOLs higher than the US (as perceived by their residents vs US residents). The problem is what that GDP is spent on and how the income is distributed. There is in fact already more than enough income and wealth right now to give every American a good QOL.

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Only if you work in the “Military, Industrial, Congressional Complex”. Then YES you accept as gospel the idea of WAR as a PROFIT CENTER with the bodies of the poor as the raw materials required to “get product out the door”.

If you distill what he’s saying its really government spending on research and development that spurs growth. We just focus most of that on War. Maybe if we redirected it the economic impact would be similar or greater. I think the multiplier effect of Military spending is much less that it is for other types of spending. Money for Welfare for instance. Of course if we did redirect it toward something like Solar or Wind the Right would howl about competing with private enterprise. That’s the reason we can’t have nice things.

Maybe Cowen can compare and contrast this with health care. Why do politicians and talking-heads constantly bitch about “health care” having become such a large share of the economy? While some purchase and royalty dollars for drugs and medical instruments flow to foreign countries, most of the dollars stay in the U.S., and the vast majority of what I (and my insurer) spend goes to doctors, technicians, labs, and office staff who are within a 30-minute drive of my home. Compare that to the share of the economy spent on high turnover imported consumer items like cell phones and sneakers manufactured abroad, or low-turnover extremely expensive military technology that either (at best) sits idle waiting to be used someday, or gets spent/destroyed/abandoned on the other side of the world–perhaps (at worst) creating even greater dangers and follow-on costs, as we see today.

I don’t disagree. The DoD is simply wingnut welfare.

Any economy that has to feed it’s oung men into the meat grinder of war to maintain and economy is a nation that is bound to fail. War destroy all in the end. I would argue that the mess the US is now in is a by product of the power FDR was forced to give industry to gear up for what he knew was coming. After the killing was over the industrialists of war were not about to allow their profits to disappear.

It is true. We can look even further back in history to other countries. Let us take Rome for an example, their “Economic Growth” was based off of being an Imperialistic Empire that would go out and conquer other lands and take their resources. England during their rise, going out and “colonizing” other places, Africa, the America’s, etc. Spain and S. America and Philippines, etc. This has always been true. Access to new sources of natural/raw materials.

But the reality is we don’t NEED it, we already have more then enough. We can sustain the world, they are just caught up in the idea of growing an imaginary number and maintaining their power hold.

We just use our military/black ops/psy ops to open the “door” to those other countries then instill a Capitalistic Regime to Economically maintain a power hold all under the guise of spreading “Freedom”, which it is not. We even do this in countries that DEMOCRATICALLY Elect different economic systems to manage their resources, Argentina anybody?

Excellent Article!