War Is Never Good for the Economy

Jeff Scully
Feb 15, 2012 at 4:01 PM

Free market capitalism is unique in the sense that its existence is dependent on the voluntary actions of free individuals. The use of force is absent in a free market, unlike other institutions of social and economic order like Socialism, Communism, or Fascism. The absence of force has lead free market capitalism to be the most productive and peaceful institution, creating the highest standard of living to ever exist.

However, this institution can be severely disrupted by the state intervening in the peaceful process of the market. The state forcefully takes from the market during times of war especially, this negatively impacts consumer good as private consumption decreases dramatically. In the recent past, many so-called conservative advocates of the free market have tried to support both the free market and preemptive war, two entirely incompatible ideas. The Just War Theory is the only plausible theory that correctly allows for the government to wage war in defense of its sovereignty.

We are often told that war is “good for the economy.” This myth could not be further from the truth. We are told that when government spends money on purchasing tanks, guns, and helicopters it creates jobs for thousands of Americans. That may be true; however we must remind ourselves every penny spent by the government has come directly from the private sector. The government helps one individual at the expense of another.  Also, the tanks, guns, and helicopters the government purchases do not have any use outside of war. Therefore, they are not a consumer good that can be used in the future. Since the government funded these purchases with private sector money, the consumer has less to spend and production decreases dramatically.

Another prime example of the state intervening in the market can be seen in WWII. The government hardly ever advocates the increase of taxes, as doing so is wildly unpopular. One of the tools the government then resorts to is price control, a dangerous tool that harms the free market. When the government inflates a currency, a rise in prices is a result of the inflationary policy. So the government tries to control prices, the producer and consumer will then both lose.

For example, if the price of milk was selling at an expensive rate of $4 per gallon, the government may step in and say that a producer may not sell his milk for more than $3 a gallon, this creates two problems. One, limiting the price of milk will increase the demand for it, now that more people have an opportunity to purchase milk at $3 a gallon, so there will be a shortage of milk. Secondly, if it costs the producer more to produce the milk than to sell it, let’s say $3.50, he will no longer earn a profit as his maximum selling price is below the cost of production. It will force the producer out of business, leaving less milk to be consumed than before the government got involved.

Another aspect of the harm done by government during war aside from inflation and price controlling is the aspect of government spending. It is extremely difficult to calculate the cost of war as the government hardly keeps a clear and responsible record for its expenditures, especially considering future ramifications after the war has ended.

For example, the Congressional Research Service has estimated that Operation Iraqi Freedom a lone has cost roughly $806 Billion so far. In addition to this amount, author of “Three Trillion Dollar War” Linda Bilmes has estimated that the projected total cost of veterans’ health care and disability payments to be between $422 billion and $717 billion.
It is entirely hypocritical for one to claim that they are an advocate of the free market, while supporting preemptive wars abroad, an idea that has recently become popular within conservatives.

If the free market were to operate smoothly, resistance against state intervention must be maintained at all times. War is not good for the economy, contrary to what we are told to believe. If the party of limited government were to stick to its principles, no conservative would dare advocate for preemptive war, as doing so would undoubtedly disrupt the market and increase the size of the state.