Arms Dealer: “Why should I help you?”
Hunt: “If you don’t help me, we will be facing war.”
Arms Dealer: “But war is good for business.”
Hunt: “Nuclear war?”
Arms Dealer: “…let’s talk.”
I certainly did not expect to be writing about economics in response to seeing Mission: Impossible – Ghost Protocol last night (a great movie, by the way). But as you can see, the above lines create too perfect a scenario for discussing the beneficence of war fallacy to pass up.
While this exchange does not present a perfect example of the beneficence of war fallacy, it certainly gives rise to an interesting question: Why is it that the arms dealer finds nuclear war undesirable but traditional war to be “good for business”?
Though I do believe–in accordance with proper economic theory–that war is bad for the economy, I will not argue that it is bad for this individual arms dealer. Indeed, a war would almost certainly increase demand for weapons, meaning higher prices for his products and increased profits for his firm. So for him, a traditional war would most likely be “good for business” (as long as his stockpiles are not the ones getting attacked), at least in the short term.
But nuclear war, as he knows, is bad for everyone. It even appears that the writers of the film assumed their viewers would also hold such sentiments, as Hunt’s argument against the economic beneficence of nuclear war seems to go without saying (requiring nothing more than a simple two-word question: “Nuclear war?”).
But why is nuclear war considered economically detrimental if non-nuclear war is beneficial? I think what many would say is that nuclear war is too large–too destructive–to possibly be economically beneficial, but that smaller “traditional” wars can be beneficial because they induce demand through increased spending. This does not follow, however, unless one can identify the point of inflection at which war becomes too large to be beneficial. Is it when $1 billion of damage is done? $10 billion? $100 billion? If such a point cannot be identified, the assertion that any war can be beneficial for the economy is baseless.
War also diverts investment from other lines of production. As our common economic fallacies page states, “Because of scarcity, the resources which are funneled into war production are no longer available to produce the things which people demand according to their subjective preferences.” This has the net result of reducing overall productivity and hindering economic progress.
So while war may be good for the arms dealer’s business, the existence of active militaries waging wars with one another is never beneficial for the economy as a whole. Lew Rockwell makes the point well in this excerpt:
“Let us never forget that the military is the largest single government bureaucracy. It produces nothing. It only consumes resources which it takes from taxpayers by force of law. Making matters worse, all these resources are directed toward the building and maintenance of weapons of mass destruction and those who will operate them. The military machine is the boy with the rock writ large. It does not create wealth. It diverts it from more productive uses.”
Very interesting article that I would just care to elaborate on. Robert Murphy and Bertrand Lemennicier both write on the issue of nuclear proliferation. More specifically, Murphy explains in his book “Chaos Theory” that in an anarchist societies, where it is all private industries, there would never be the development or ownership of nuclear weapons. Rather, it is recognized that there is nothing to gain from foreign conquest. Instead, the same high precision weaponry that Hoppe suggests in his essay, “The Private Production of Defense.”
On the issue of current production agencies though, Mises writes in “Nation, State, and Economy,”
“The leaders of the armament industry are not themselves bloodthirsty; they would just as gladly earn money by producing other commodities. They produce cannons and guns because demand for them exists; they would just as gladly produce peacetime articles if they could do a better business with them.”
I agree with the fact that nuclear war is much more destructive than non-nuclear, but it would be interesting to look into whether or not the armament industry actually has a say in the manufacturing of nuclear weapons. From my research of the past couple years of the armament budget, expenditures to the armament industry is solely dedicated to the manufacturing of planes, submarines, navy battleships, guns, etc… but no mention of WMD’s. This comes back to your quote from Rockwell that the government only consumes resources to build weapons of mass destruction, rather than a subsidized armament industry that does to an extent produce its goods. Only a manufacturer with no real expenses would be willing to engage in product of nuclear weapons because the real costs are never actually borne by the state, but rather by the state’s citizens (including the entrepreneurs of the armament industry).
Thanks for the comment, Deckert. You are absolutely right to say the costs are borne by citizens rather than the state, and worse, these costs are borne twice. First, in the extraction of revenue that is funneled towards projects not in accordance with subjective preferences and secondly as these same weapons are used to destroy both capital accumulation and human life.
The idea that war fosters prosperity is positively Orwellian.
A point that I offer in my Public Finance paper is that trade relations are further restricted when nations are at war as it decreases the world division of labor and world market. Citizens of warring nations are further made worse off as the government imposes sanctions limiting the extent of their trade, which Ron Paul writes, is no different than any other act of war. However, as the Cold War has shown with the grain embargo on the Soviet Union, all that happens is incumbent entrepreneurs lose their market share when government’s intervene. The Soviet Union simply goes elsewhere for their grain demands and the incumbent entrepreneurs never regain that market share. We’ve seen this happen with several other major commodities, sugar being one of the greatest.
You are right to notice the many secondary effects of government intervention. Restriction of trade often provides the impetus for war, and restriction of trade is war’s inevitable result. A weaker division of labor is the result of either.