Why the State and Keynesians Love War

A look into the minds of those who love war

Governments love going to war, which may seem a bit strange because according to the "What the State Fears" section of Anatomy of the State, governments fear above all else the end of their power which can either come from another state conquering them through war, or by revolution from the people. However, while wars do pose some risk to governments, war also gives governments a great chance to expand the scope of their power, both over new territory that they conquer, and even among their own people as they flood them with propaganda that this war isn't really about one government fighting another, but one people, fighting another people, totally separate from your own. In the words of Randolph Bourne, "war is the health of the state".

The evil, evil Nazis who want nothing more than to eat the heads of babies.

In the Medieval days, this fallacy was almost entirely destroyed, and war was simply looked upon as pointless endless squabbles between various nobles that the peasants simply ignored. However, with the rise of democracy, identification of the state with society as a whole has been redoubled, and people once again believe that wars are waged against them and not the government. In the US, this fallacy is heard all the time as people talk of the "brave men and women fighting in Iraq for our freedom" or some similar bullshit.

So beyond simply encouraging nationalistic/patriotic thinking and giving governments a chance to expand their power base, war is also a great chance for politicians to gain prestige as "great leaders". FDR, Winston Churchill, and especially Stalin all did horrible, horrible things with their position in power, yet many people (except for Stalin thanks to the Cold War) are looked up to as great leaders among men, not because the people are able to make good comparisons between these men and peace-time leaders, but because of propaganda and readily apparent action.

Furthermore, along with the power, the prestige, and the propaganda, war also allows governments to gain massive control over the people's everyday lives as "emergency wartime measures". Governments nationalize industry and force businesses to switch production over to certain kinds of goods that are necessary for this war. After all, any red-blooded American should be happy to help their governments defend them from the evil Nazis, and anyone who resists might as well be a traitor to his people. If they don't take over an industry, the government may still impose price controls as a way of making sure they get the price for what they want. They may say that this is because we need "rationing" in a time of war, so prices must be controlled by them. Never mind that prices going up and down already rations goods in the economy.

War is also a perfect excuse for governments to take over the money supply, eliminating a gold standard, so that it may print as much money as it needs to spend. In times of war, the government needs lots of money and it needs it now, so it can shame unpatriotic "gold hoarders", and fund its war.As you can see from this chart, governments really do love to print money, especially for war.

If people complain about these situations and the government is not able to guilt the public into shutting up, then they are able to simply shift the blame over to the enemy, who has forced them to impose these terrible measures as they are necessary for victory. Of course once these measures are in place, they very rarely ever go away, even after the war is over. Governments don't voluntarily give up power once they have taken it. Take a look at the illustrated version of F. A. Hayek's Road to Serfdom. War gives governments a chance to exercise their real power.

These kinds of actions are unthinkable in an anarcho-capitalistic society. Defense groups would be unable to hide the cost of their actions by inflating the money supply, and warmongerers are required to charge higher prices for their destructive acts (paying for people to go and die, paying hazard pay, paying for the things they destroyed, etc.), moving them over to their cheaper, more peaceful, and more efficient competitors.

Liberty is to peace as government is to war.

Now Keynesians especially love war, as war means that governments are going to dramatically boost their spending, which to them is synonymous with a healthy economy, and exert the kind of control over the economy that they lust after. According to the Keynesian version of history, America was stuck in the Great Depression for years due to overproduction of capitalism, causing the general glut. President Hoover tried the laissez-faire approach, but the economy just got worse, but then good ol' Franklin Delano Roosevelt took to the stage and started his New Deal programs,which helped, but it wasn't quite enough to save the economy. But then, thankfully, the US entered into World War 2 which raised spending enough to get out of the Great Depression.

Wars create this wonderful economy because the government spends its money on tanks and ships and planes and bombs and ammo so that it can all send it out into the middle of the nowhere (if you're lucky.) and blow it up. Apparently, doing that is good for the economy.

Just to prove that this is not an ad hominem attack by me, I will provide a good example of this type of thinking. The most prominent Keynesian economist (or at least English speaking journalist) is Paul Krugman from the New York Times. Krugman is basically just a synonym for Keynesianism and inflation now. Krugman actually won the Nobel Prize in Economic Science back in 2008, so this is not some crazy guy on the fringe of economic thinking. And, in all seriousness, the Nobel Prize winning Paul Krugman advocated for the government to fake an alien invasion so that the government could increase spending and get us past the recession.

Ozymandias would be proud.

But war gets even better for Keynesians. Not only does the government increase its spending, but the public often needs to as well (except of course for those under rationing). Keynesians joyously count all the houses bombed during war as the "blessings of destruction", which has "backed up demand", encouraging people to spend money on building new houses. And those people need to replace all the furniture, refrigerators, and washing machines that got blown up as well, so that's more "prosperity creating spending".

And the Keynesians may even further count the blessings of war as it "creates jobs", decreasing unemployment! Thanks to war, people may be rounded up and shipped off to the battlefield so that they may fight to the death. Do the wonders of war know no bounds?

So by Keynesian reasoning, through diverting production to things which serve no socially useful purpose, and even worse, blowing them up causing the destruction of the useful things they were made of and destroying other useful things that blow up with it, and sending all your most able-bodied people to go out and die instead of working to produce things that help themselves and other people live better lives, helps the economy.

And this is why the broken window fallacy is so very, very important.

Jon Stewart's 19 Questions for Libertarians: Response

A while back, Jon Stewart proposed 19 questions for libertarians. This is pretty old news, but I've decided to take a shot at answering them.

1. Is government the antithesis of liberty?

No, the aggressive use of force is the antithesis of liberty. A government is simply an organization that tries to maintain a monopoly on the use of force. Common criminals can just as easily be the antithesis of liberty as well though.

2. One of the things that enhances freedoms are roads. Infrastructure enhances freedom. A social safety net enhances freedom.

First off, that's not a question. Secondly, liberty isn't something that can be "enhanced". It is simply the lack of coercion. And finally, libertarians do not call for roads to stop existing but for them to be created voluntarily.

3. What should we do with the losers that are picked by the free market?

Who the hell is "we"? If you mean people in general, people can do whatever they want with the losers as long as its voluntary.

4. Do we live in a society or don't we? Are we a collective? Everybody's success is predicated on the hard work of all of us; nobody gets there on their own. Why should it be that the people who lose are hung out to dry? For a group that doesn't believe in evolution, it's awfully Darwinian.

I think the fact that you use the word "we" already shows that we live in a society. Society a word for the mass of all interaction between individuals. But as for leaving people "out to dry", libertarianism does not say what you have to do with these people. If you want to give to charity and help them out, more power to you. But that's your choice as an individual, something only you can decide to do. Markets, however, need to run in a way so that businesses using scarce resources inefficiently (that is, a business running at a loss) be phased out so that those resources may be reallocated to where they need to be. For succeding businesses to thrive, failing businesses need to die, and keeping failing businesses alive by government intervention only does so at the expense of successful businesses and acts as a net drag on the economy. We can't have privatized gains and socialized losses.

Also, who said libertarians don't believe in evolution? I have absolutely NO idea where you're getting this.

5. In a representative democracy, we are the government. We have work to do, and we have a business to run, and we have children to raise.. We elect you as our representatives to look after our interests within a democratic system.

Bullshit, we are not the government. I'll defer to Rothbard on this one.

The useful collective term "we" has enabled an ideological camouflage to be thrown over the reality of political life. If "we are the government," then anything a government does to an individual is not only just and untyrannical but also "voluntary" on the part of the individual concerned. If the government has incurred a huge public debt which must be paid by taxing one group for the benefit of another, this reality of burden is obscured by saying that "we owe it to ourselves"; if the government conscripts a man, or throws him into jail for dissident opinion, then he is "doing it to himself" and, therefore, nothing untoward has occurred. Under this reasoning, any Jews murdered by the Nazi government were not murdered; instead, they must have "committed suicide," since they were the government (which was democratically chosen), and, therefore, anything the government did to them was voluntary on their part. One would not think it necessary to belabor this point, and yet the overwhelming bulk of the people hold this fallacy to a greater or lesser degree.

We must, therefore, emphasize that "we" are not the government; the government is not "us." The government does not in any accurate sense "represent" the majority of the people. But, even if it did, even if 70 percent of the people decided to murder the remaining 30 percent, this would still be murder and would not be voluntary suicide on the part of the slaughtered minority.

- Murray Rothbard, Anatomy of the State

Also, again, not a question.

6. Is government inherently evil?

Aggressive coercion is inherently evil, and the defining features of government is aggressive coercion, so I'll go with yes.

7. Sometimes to protect the greater liberty you have to do things like form an army, or gather a group together to build a wall or levy.

Yes. Yes you do. And?

8. As soon as you've built an army, you've now said government isn't always inherently evil because we need it to help us sometimes, so now.. it's that old joke: Would you sleep with me for a million dollars? How about a dollar? -Who do you think I am?- We already decided who you are, now we're just negotiating.

You confuse government with security. Building an army isn't the same as building a government. A government is a territorial coercive monopoly on security that receives its income by "the political means" (i.e. theft).

9. You say: government which governs least governments best. But that were the Articles of Confederation. We tried that for 8 years, it didn't work, and went to the Constitution.

The Articles of Confederation actually did work exactly as they were meant to. Politicians simply wanted more power and overthrew it. Perhaps you're merely repeating what you were taught in state schools. Remember, history is written by the victor.

10. You give money to the IRS because you think they're gonna hire a bunch of people, that if your house catches on fire, will come there with water.

No, I give money to the IRS because I think they're gonna hire a bunch of goons to lock me in a cage if I don't. What you are saying implies that I give money to them voluntarily. What if I believe a different group can hire a bunch of people to stop fires in my house better than the IRS can? Am I allowed to stop paying them? No, I'm not. Taxes are theft, operating in the same way as a protection racket.

11. Why is it that libertarians trust a corporation, in certain matters, more than they trust representatives that are accountable to voters? The idea that I would give up my liberty to an insurance company, as opposed to my representative, seems insane.

Businesses are more accountable to consumers than politicians are to voters. If I don't like the way a business does things, I can drop my relations with them entirely. I can't do the same for politicians. Furthermore, democratic elections are subject to rational ignorance. When I spend my own money on a business, I have a good incentive to try and find the best product I can. But with voting, with a little mental arithematic I can pretty quickly figure out that the odds of my vote making a difference in an election are very small, and might try and vote for what I consider a "lesser evil" to keep a greater evil out of office. And there is also a very strong argument that politicians do not decide upon their actions based on what the people think, but by what special interest groups lobby them to pass things.

There is also a sharp distinction between "state power" and "social power". Businesses gain power by offering me products. Governments gain power by the barrel of a gun.

Now I recognize that there are many, many faults with corporations today, but most of that is due to the unholy matrimony between business and state. I would not expect corporate bailouts or limited liability groups in a free market.

12. Why is it that with competition, we have such difficulty with our health care system? ..and there are choices within the educational system.

We don't really have free market competition in health care. Government licensing and patents are just the tip of the iceberg with the massive regulations in the health care system. With the American Medical Association, we're essentially running as a medieval guild.

13. Would you go back to 1890?

No, that might mess up the time stream and prevent my own birth. If I had a time machine, I'd go to the future.

14. If we didn't have government, we'd all be in hovercrafts, and nobody would have cancer, and broccoli would be ice-cream?

That's just a sentence you put a question mark at the end of. The utopian socialst Charles Fourier, however, did promise that under socialism the seas would turn into lemonade. I'm not exaggerating here, he really promised that.

15. Unregulated markets have been tried. The 80’s and the 90’s were the robber baron age. These regulations didn't come out of an interest in restricting liberty. What they did is came out of an interest in helping those that had been victimized by a system that they couldn't fight back against.

The intentions you make your system on doesn't change what the system does. As they say, the road to hell is paved with good intentions. Besides, the late 1800's showed the greatest economic boom in human history.

16. Why do you think workers that worked in the mines unionized?

I don't know, and I really don't care. If people want to unionize, that's fine, as long as its voluntary.

17. Without the government there are no labor unions, because they would be smashed by Pinkerton agencies or people hired, or even sometimes the government.

So you're essentially admitting that the organization that you claim is essential for the existence of this group has acted in a way detrimental to the existence of the group. Right.

Anyways, what you really need is security, not government.

18. Would the free market have desegregated restaurants in the South, or would the free market have done away with miscegenation, if it had been allowed to? Would Marten Luther King have been less effective than the free market? Those laws sprung up out of a majority sense of, in that time, that blacks should not.. The free market there would not have supported integrated lunch counters.

I firmly believe that markets do away with discrimination better than any other way. Money is the best diplomat in human history. Trade between nations has prevented wars. Businesses that choose to discriminate are choosing to economically isolate themselves.

You seem to forget that Jim Crow laws were laws created by the government.

19.Government is necessary but must be held accountable for its decisions.

Jeez, at least the other non-questions had some implied criticism of capitalism. This is nothing but mere assertion. I'll respond in assertion then.

Government is not necessary at all and the very fact that it has a monopoly on law makes in unaccountable.

What is demand?

It occurs to me that many misunderstandings of economics today come from a confusion with "demand" and "need". A common broken window fallacy is to say things like "World War 2 boosted demand for tanks and similar resources to fight off the Nazi's, and since a depression is essentially a lack of demand, World War 2 (and big government spending in general) ended the Great Depression. Furthermore, the bombing raids that destroy people's homes increases demand as well, as those people will now need to buy new homes.", or similar reasoning.

"What actually brought the Great Depression to an end was the enormous public spending program otherwise known as World War II."

- Paul Krugman

These statements only appear to have some genuine reasoning behind them because the english language has two different uses for the word "demand".

In one sense, demand can mean a need or desire. It is certainly true that war can create very pressing needs in society, both for protection from destruction and repairs for the damages it causes, just as it is true that breaking a shopkeeper's window creates a need from him for a new window.

Look at this thriving economy!

But the other meaning that I think economists are more familiar with when talking about markets is desire enabled by purchasing power. It doesn't matter how much I want something if I don't have the ability to purchase it from someone else. An increase in purchasing power, not need, is what increases demand.

So with this distinction, we can immediately see a problem with the idea that that destruction increases demand as it focuses on generating need as compared to empowering already present needs. But to avoid further logical blunders and to understand the full extent of the damages of destruction, one must understand what purchasing power is.

So where does purchasing power come from? If you ask your average Joe how you can increase your purchasing power the first response you'll likely here is "get more money". This appears to be true at first. If I want to make more purchases, I need to have more money. If you look at supply and demand charts, the axis beside whatever you are trying to purchase is measured in dollars as well. 

But it goes a little bit further than this. If money itself was what enabled demand, then simply printing more money could increase demand. This is exactly the mistake people make when they support "stimulus packages" that will save the economy by giving everyone more money, thus letting them buy more things and fixing the economy forever. But that's only looking at half of the story. Money is just a commonly used medium of exchange. Take out the extra step, consider trade in the term of bartering, and you can see its true nature.

To be able to demand anything you need to produce something someone *else* demands. To be able to offer something in trade, you need to have produced that thing that you offer in trade, just as they needed to produce the thing they are offering to you.

On markets, products are exchanged against products.

With this, we can see that words like "supply" and "demand" are really entirely relative terms. They're two sides of the same coin. The graph above would be just as accurate, nay, more accurate to say "quantity A" and "quantity B" instead of "quantity" and "price". The x-axis could be the quantity of wheat demanded while the y-axis could be the quantity of corn, alcohol, televisions, gold, or dollars. My supply is your demand and your demand is my supply.

Jean-Baptiste Say, along with his market

So in answer to the original question, purchasing power comes from production, from the supply of goods that can be offered in trade. This is the essential lesson of Say's Law of Markets.  If one wants to increase demand, simply printing more money will do you no good as it adds no more things to indirectly trade for. People will receive a sudden increase in dollars and mistakenly believe themselves to be rich only to find that they have nothing to buy. Its a medium of exchange with nothing to mediate between. Furthermore, this reveals new light on the destruction of war. Not only does destroying things fail to increase demand, but it actually reduces demand as people now have less products to trade against to other people!

In short, production of what people want is what creates demand, while the destruction of things people want destroys demand.

Chicago officer shoots family puppy, gives them a parking ticket, and then tickets them again when they tell the media

A 20-pound family puppy when out to see a Chicago officer who was writing their family a ticket, only to be shot by the officer. After shooting their dog, the officer proceeded to finish writing the ticket, and went on his way without apologizing. The puppy was being groomed to become a show dog, but will now have a permanent limp.

http://www.dnainfo.com/chicago/20121204/uptown/couple-says-trigger-happy-cop-popped-their-pup-then-wrote-traffic-ticket

But hey, policing is a dangerous job, maybe the dog had it coming. Maybe we're being too quick to judge the man who shoots puppies. Well, just in case that wasn't enough, get a look at this.

The family told the media about this, as you can see above, only to find themselves with another visit from the police, two of them this time, both a sergeant and a lieutenant, to bring them a ticket for "not having their dog on a leash", in an obvious attempt to intimidate them for talking to the media.

http://www.dnainfo.com/chicago/20121204/uptown/owner-of-shot-puppy-ticketed-again-by-chicago-police

You know what the punishment for this officer is going to be? Not a God-damn thing. You don't cross the blue line.

Hostess Summary

I found this brilliant summary of the Hostess situation on Reddit. All credit goes to KingofKona.

I know I am going to get in trouble for posting this because there is a thing called confirmation bias in psychology that causes people to only want to hear what they already believe - it is why you see racists skip over stories that portray minorities in positive ways or why the religious will often hurry up and click to another channel if a special talking about Darwinism is on television. But I'm going to write it anyway. Why? Because it is the right thing to do.

As someone with a very deep economics, financial, and business background, this entire conversation is painful to read. There are so many misconceptions about pension accounting and the bankruptcy process that I feel like reading this thread is the equivalent of seeing those videos where people at Glenn Beck rallies are interviewed spouting off about Obama's secret muslim plot to make us all gay married communists who have interracial children and cross dress while burning flags.

Instead of writing a thirty-page explanation, I am going to explain this like I would to my five-year-old niece. I am not trying to be condescending, so I apologize for the tone. I am trying to remain sane.

For more than eleven years, Hostess was horribly run, including by a CEO who left earlier this year after awarding himself huge pay increases and demanding union concessions.

The new CEO came into office back in March or April and, after discovering these large pay hikes, ordered the top four executive salaries to $1 for the remainder of the year to make up for it, before being restored next year, evening things out.

This new CEO, with the backing of the bailout investors, went to the unions and offered them a package that included:

• A twenty-five percent (25%) ownership stake in the business, which would transform Hostess into one of the largest partially employee-owned firms on the planet.
• A package of bonds in the company to go to the employees with a face value of $100,000,000 that would generate interest and be repaid in the future
• Two seats on the board of the directors, providing influence and power to shape the future of the enterprise

In exchange, the unions had to agree to:

• Cut existing pay levels to fall in line with other major bakeries
• Do like the other 90% of American manufacturing firms have and "freeze" pension plans, meaning that any new employees will have to use a 401(k) instead.
• Pay more out of pocket for some other expenses such as insurance

If all of this happened, the employees of Hostess would not only get to keep their job, but they would be working for themselves. It was the best possible solution to a terrible situation caused by years of mismanagement, none of which was the fault of the current CEO who has only had the job for 8 months or so.

The Teamsters union wisely signed up. They acknowledged that the situation was bad. They talked about how terrible former management had been. They focused on the future and knew that this could work out well and, among all the potential choices, was the best that could be expected.

Then, a smaller union - the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union - said no.

They (the BCTWGMIU) were warned that if the company shut down in a strike, the finances were so weak the doors would have to be closed. Everyone would lose their job. There would be no ownership. There would be no bonds. There would be no seats on the board of directors. There would be no new employees let alone pensions for new employees. It was a complete thermonuclear scenario that would destroy the lives of 18,500 hardworking families.

The BCTWGMIU struck anyway and the Teamsters, to their credit, crossed picket lines and remained reasonable because their actions were based on facts and analysis of what was economically feasible. The company begged the BCTWGMIU to return to the table, but they refused, talking about the litany of abuses of past managements.

For anyone who is successful, well educated, and familiar with strategy such as game theory, the choice is clear. When faced with a total wipeout, you take the option that gives you the greatest long-term chance of survival. Even if the new deal had resulted in only an extra six-months of paychecks, that is six months of income for 18,500 families that relied on that cash. When you represent others, like union leaders do, their welfare is your sole concern.

That is precisely what the Teamsters did. However, the BCTWGMIU behaved like a father who commits a murder-suicide of himself and the children when a spouse leaves, convinced he is in the moral right and that he had no other choice because of his evil ex-wife. He writes a long note detailing all the past mistakes she made and how she drove him to take this action. BCTWGMIU drove Hostess straight into liquidation. The murder-suicide analogy is appropriate because that is exactly what this was: An economic murder-suicide. A vast majority of those 18,500 workers were innocent, behaved the best they could, and did the right thing in a terrible situation. Their entire lives have been destroyed by a handful of their foolish coworkers who were more interested in making a point and detailing past grievances than working with the new team that had come in and offered them a partnership stake in the firm. They were so stuck in the owner vs. employee mindset they ignored the chance to become owners.

The BCTWGMIU just struck a major blow to the little workers' rights power remaining in the United States and hurt the labor movement incalculably. Even worse, they are too foolish to see it. The ramifications have already begun. If a new factory wants to raise money, don't you think investors are going to demand that it locate in a right to work state like Texas, so if this had happened, all of the workers can be summarily fired? The legacy cost of this will be with us for decades.

TL;DR: The Teamsters Union behaved reasonably. The new CEO behaved reasonably. The BCTWGMIU decided it couldn't get what it wanted - which was not economically possible based on the numbers - and turned down the chance to own 25% of the business, collect $100 million in bonds, and get seats on the board of directors. Now they get nothing, everyone loses their jobs, the owners get wiped out, and other corporations get to come in and pick up the assets for pennies on the dollar.

Another user "Time_Loop" also wisely pointed out that this might not actually be murder-suicide for BCTWGMIU, as their union will now have a reputation of not backing down no matter what with other companies.

http://www.reddit.com/r/politics/comments/13eufq/hostess_took_union_members_self_funded_pensions/c73j4sa

Obama Bombs Yemen Hours After Winning Reelection

Figures.

http://antiwar.com/blog/2012/11/07/obama-bombs-yemen-hours-after-winning-reelection/

And it's a win for the Federal Reserve and Goldman Sachs!

Don't know what I was expecting. I mean, to think that the pro-war, pro-NDAA, pro-TSA, pro-Patriot Act, pro-interventionism, pro-torture, pro-foreign aid, pro-healthcare mandate, pro-drug war, pro-bailout, pro-stimulus, pro-corporatism, pro-Federal Reserve, pro-deficit, and was primarily funded by Goldman Sachs won the election.

Absolutely shocking.

But in all honesty, it's probably a good thing Obama won. The only possible benefit I could really see from Romney winning would have been Supreme Court picks. Now, we've taught the Republican party that even though they were up against a candidate with an approval rating as low as Carter's, without a good candidate of their own they will not win.  This may give rise to some actual changes in the 2016 election.

Or maybe expecting real change through the election process is a fantasy by itself. We'll see, I guess.

In a bit of actual good news, congratulations Colorodo! With the pass of amendment 64, marijuana is finally legal for recreational use by adults!