We’re discussing the myth of the benefits of war, which goes something like this: “Doesn’t war, death and destruction have positive consequences for the economy? Just look at how many people have jobs due to rebuilding ruined cities and infrastructure”.
▪ Introduction. The myth of post-war prosperity as a variation on the myth of broken window
“War… War never changes” – announces the voice of Ron Perlman in the prologue of the next parts of the classic series of Fallout computer games. Each game reveals a post-apocalyptic world ravaged by nuclear conflict, where decimated humanity leads a poor and uncertain existence in the few primitive settlements scattered among the wastelands. As the very nature of war and its consequences – death and destruction – do not change – so do false beliefs about… the paradoxical benefits of war. “Yes, it cannot be denied that war does indeed bring death and destruction, but perhaps it is worth looking at the other side of the coin: huge boosts of productivity and economic growth after war, right?” If one finds it hard to believe in the existence of “defenders” of the aftermath of wars, let him look at one simple example: the general historical narrative concerning the effects of the Second World War. Yes, millions of victims and dozens of cities bombed to the ground – but in the long run, Germany benefited because the war transformed obsolete factories into modern ones and began to grow rapidly; The US had become an economic power because, thanks to the war, it had to multiply public investments, etc. The myth of the “blessings” of war damage is a variation on the old opponent of reasonable economists, i.e. the Bastiat’s myth of broken window – but a special variation. The “war blessings” mythologists admit that breaking a window to give extra work and income to the glazier will not increase wealth – but they only admit it because it is happening on an individual level; and when we move to the level of nations and states, the rules suddenly change and destruction can create wealth for societies. Where does this belief come from – and why is it wrong?
▪ First mistake: confusing needs with demand
It is true that in a society devastated by war, poverty reigns, which increases post-war needs. However, war mythologists go a step further and propose the following conclusion: the increase in human needs due to the lack of the most basic goods and services means an increase in demand, and – as is commonly accepted – demand drives supply. This in turn means an increase in productivity and a greater supply of goods and services than before the war – all thanks to the post-war needs of society! The proof would be the cities and countries quickly rebuilding after the devastation, which rise from the ashes more modern than before.
The main mistake here is to confuse human needs with the phenomenon of demand. Need is not the same as demand because effective economic demand requires not only the existence of a need but also adequate real purchasing power. In short, so what that there is a rise in the need of the people – who are so deprived of basic livelihoods after the war that they are desperately trying to resume production of food, clothing, building materials or toilet paper – when the losses of the war took a large part of the previously accumulated capital, that could enable or at least accelerate the creation of new needed goods? It is not necessary to refer to war here to see the absurdity of this argument: the material needs of poor Third World countries are incomparably greater than the needs of the wealthy societies of Western Europe or the United States – but the effective demand for goods and services cannot be greater, because purchasing power and available capital are much more scarce there.
▪ Second mistake: confusing purchasing power with quantity of money
A more subtle argument from war mythologists is to focus solely on monetary indicators – especially without taking into account the increase in the money supply in circulation. Some pointed at the world’s “good” economic performance right after WWII – and said it was made possible by the war itself. They forget, however, that almost every war – especially in the times of fiat money – means a huge increase in inflation forced by the necessity to pay for war expenses by the government. So we have growth – not prosperity, but the supply of money.
▪ Third mistake: confusing individual industries with the interests of society as a whole
The devastation caused by the war is actually a good business and a possibility of earning money – for representatives of specific sectors of the economy. Producers of certain products can get rich quickly: the construction industry relatively benefits from the destruction of houses, factories and entire cities. Moreover, shortly after the war, companies suddenly do relatively well with all goods which production or sale was made difficult or impossible during the war, such as cars and refrigerators – because a period of unavailability contributed to cumulative post-war demand for these products.
Have you come across the myth of the \"benefits\" of war before?
However, the indication of the rapid development of construction companies (or automotive, electronics or household appliances companies…) just after the war does not prove the benefits that the destruction caused by armed conflict would bring to society – but only a change in the structure of demand forced by the war shortages or destruction. If it weren’t for the war, people would still buy goods, pay for services, and invest money – they would simply be consumers of other businesses.
War does not make human efforts more productive – it changes the direction of those efforts; it changes the balance between the branches of production, i.e. it changes the structure of the entire economy.
▪ Fourth mistake: confusing “building new stuff in place of the old stuff” with the development of the economy
One of the more bizarre but widespread claims of war mythologists is that the devastation of war, including even bombed cities lying in ruins, was an unexpected benefit for Germany and Japan after the Second World War. Why? Because thanks to damages, the Germans and the Japanese were able to replace old infrastructure and old factories – with more modern, efficient and better equipped, which allowed them to produce more efficiently and at lower costs, while, for example, Americans had to deal with their “outdated” factories and “archaic” infrastructure.
Why is this claim absurd? If that were the case, the Americans (or any other non-war society) could easily counterbalance this alleged “advantage” of defeated Germany and Japan – simply by ruining their own cities and rebuilding everything anew. If the destruction of the old factory and its equipment were to benefit the producer, because the means of production used in it had worn out or aged to such an extent that their value had fallen to zero – then there would be no need for war or bombing, and a demolition team would be enough to demolish old equipment and buy a new one. The fact that factories and infrastructure were worn out and obsolete could have made some of the war damage less of a financial loss than it initially appeared, true – but it would not make the destruction “beneficial” for producers.
Even more importantly, neither a private entrepreneur nor a state planner can replace infrastructure or factories with the new ones if they have no savings: accumulated capital that will enable replacement. And what is the destroyer of accumulated capital? War.
It is true that certain scientific discoveries or the development of certain technologies accelerated by hostilities may indirectly contribute to an increase in productivity (and consequently: prosperity) in certain branches of the economy after war. However, this does not change the fundamental flaw in the claims about the economic benefits of war, which is simply a new version of the old false myth of broken glass.
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Books that we used to create the script:
Henry Hazlitt, Ekonomia w jednej lekcji, wyd. Znak-Signum, Kraków 1993
Ludwig von Mises, Ludzkie działanie. Traktat o ekonomii, Instytut Ludwiga von Misesa, Warszawa 2007