Why Do We Need Wars for Great Recoveries?

Financial FAQs

Nobelist Paul Krugman has said history tells us it could take another world war, or similar mobilization effort to put everyone back to work and economic growth to return to historical levels from the Great Recession—even an Alien Invasion would do it, he once quipped

In fact, the Great Recession was the equivalent of the Great Depression, which took more than 10 years of massive infrastructure building, retooling of whole industries, and a World War to recover. But aren’t the wars are we are now fighting—against ISIS, Ebola, and global climate change—such equivalents?

What do we mean by that? Even the New Deal wasn’t enough to get us out of the Great Depression. It took the mobilization of everyone in the effort of producing and building things to defeat a worldwide danger. Government as well as the private sector was involved, as all governments are during wartime. Governments created the jobs and paid the bills that produced the millions of tanks, planes, and war equipment needed to defeat our enemies.

Well, it looks like we already have more world wars on our hands. ISIS has declared war on infidels and apostates, the Ebola Virus could infect and maybe kill tens of not hundreds of thousands, and climate change is scheduled to flood major coastal cities by 2050.

The Pentagon has even said that global climate warming could provoke more wars and cost $trillions in lost property and foodstuffs if not dealt with soon. “Climate change will affect the Department of Defense ability to defend the nation and poses immediate risks to U.S. national security,” it has reported.

And the Ebola virus? The most authoritative model, at the moment, suggests a potential economic drain of as much as $32.6 billion by the end of 2015 if “the epidemic spreads into neighboring countries” beyond Liberia, Guinea and Sierra Leone, according to a recent study by the World Bank. This includes the possibility of the quarantine of whole countries, and the consequent reduction in world travel and trade.

The war against ISIS is also predicted to not only be very long, but very expensive. In a critically important article Harvard Professor Linda Bilmes wrote for the Boston Globe this week, the author of The Three Trillion Dollar War (with Nobel Prize winning economist Joseph Stiglitz) points out that although the US has already spent approximately one billion dollars thus far on President Obama’s plan to “degrade and destroy” ISIS, the price tag is going to climb steeply — and quickly — from there. Direct costs of the president’s plan will likely be on the order of $22 billion per year, but that is only the start.

Shouldn’t this call for mobilization of a nationwide campaign to defeat these enemies that threaten not just US, but the rest of the world? The 2014 Climate Change Adaptation Roadmap anticipates that rising temperatures, changing precipitation patterns, climbing sea levels and more extreme weather events will collectively have a profound effect on U.S. security:

‘In our defense strategy, we refer to climate change as a “threat multiplier” because it has the potential to exacerbate many of the challenges we are dealing with today – from infectious disease to terrorism. We are already beginning to see some of these impacts,” said the report.

A 127-page UN study on global warming “leaked” to Bloomberg News includes a 32-page summary and is filled with language highlighting the dangers from rising temperatures. Those include damage to crop production, rising sea levels, melting glaciers and more pervasive heatwaves. The report mentions the word “risk” more than 350 times; “vulnerable” or “vulnerability” are written 61 times; and “irreversible” comes up 48 times.

Possible permanent changes include the melting of the ice sheet covering Greenland. That would boost sea levels by as much as 7 meters (23 feet) and threaten coastal cities from Miami to Bangkok along with island nations such as the Maldives, Kiribati and Tuvalu.

This means putting everyone to work that wants to. It can be mass employment to rebuild the $2.2 Trillion in deferred infrastructure and climbing that the U.S. Society of Civil Engineers has been warning about, or putting the 11 million unemployed back to work building more schools, or cleaning up our environment, or replanting forests, or even rebuilding some of those homes that need to replace those lost during the housing bust.

There is currently a shortage of available homes with rental costs rising sharply. Government could subsidize the refinancing of home loans, as was done during the New Deal by the Home Owners Loan Corporation (HOLC). By the HOLC’s final year in 1936, it had provided just over a million new mortgages, had lent out approximately $350 billion ($750 billion today), and by 1934 about one in five mortgages in America were owned by the corporation. This is in contrast to just $1.8 billion spent by the Obama administration to date in subsidizing today’s distressed housing market.

Why not find a way to mobilize all our resources to fight those wars? GW Bush understood that government spending was required to fight his Wars on Terror, yet left us with the massive federal deficit because he wouldn’t mobilize and unite all Americans to participate. Instead he cut taxes sharply, rather than use the Clinton budget surplus to pay for it.

President Obama could cite the urgency to combat the spread of Ebola as well as ISIS in order to spend what is necessary to boost U.S. economic strength now. We have known since the Korean War that governments had to spend to create prosperity in peacetime as well as wartime. And what happens when we have another Hurricane Sandy or more Katrinas? Does anyone believe that we can’t afford to build what is necessary to prevent more natural disasters?

It’s only when those lessons of Great Depressions and wars are forgotten that we listen to the wrong people, forget we are a United States, and have the power to defeat such enemies.

Harlan Green © 2014

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

About populareconomicsblog

Harlan Green is editor/publisher of PopularEconomics.com, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
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