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.

The Basic History of Money

It's true, there is nothing quite as wonderful as money. A man can only produce so many things on his own, but thanks to money he can obtain things he never could have on his own. Money allows us access to the production of others without the use of coercion.

But to best understand this, we need to know how the economy works, at the most basic level. As the creation of matter ex nihilo is beyond our mortal grasps, we are faced with the problem of scarcity. Not everyone can use the same thing. Everyone can not stand on the same spot, they can't eat the same food, nor can we own the same property. To be able to survive, man must collect resources. To thrive, man must improve upon these resources. This is why property rights are so important.

Now there are a lot of theories on property that I will not bring up here. But given that you have property, what then? What if someone else has something you want?

There are two methods of obtaining this item. There is the involuntary way, whereby the item is stolen or the person is threatened into handing it over. This is the method of criminals and politicians. Then there is the voluntary means, whereby the other people freely gives you the item.

But this usually is not out of the goodness of that person's heart. Normally, this is done by trade. Trade is when you offer something to that person in return for whatever they offer you.

The most basic form of trade is the bartering system. This is the simplest and most direct means of trading. If you've ever traded a Pokemon card, you should understand how this works. You offer one good or service to a person in return for another good or service. It's a very simple concept.

But there is a basic flaw in this system. Not everyone values your stuff as much as you do, or as another person might. One person might be willing to trade you a lot of stuff for fish, while another person wouldn't want fish at all. To be able to trade with this person, I would have to discover what he wants, and then track down someone else who has that item and hope that they like my apples more than the first guy did so that I can trade with him. As I'm sure you can imagine, this heavily limits the number of people you can trade with.

This is where money is invented. Money, in the most basic sense of the word, is a commonly used medium of exchange. This means that whatever is being used as money is something most people consider valuable. So instead of directly trading my apples with the person who wants them, I sell them for money and then use that money to purchase the item.

This money could be anything. It could be corn, dried fish, shells, alcohol, goats, salt, whatever. As long as it was commonly valued and tradeable, it works. But by far the most practical and universally accepted item has been silver and gold.

Gold and silver, silver and gold.

Both were, and still are, considered precious metals. They are rare enough to be highly valued, but common enough that it could be commonly used in trade. Not only that, they both melt at relatively low temperatures and therefore can be shaped into different shapes, like coins.

Thus, humanity naturally established a common medium of exchange. Eventually though, as bigger purchases needed to be made, carrying around around the actual pieces of gold became very costly, being both heavy and leaving it open to be stolen by thieves. So what happened was the money was put into a bank. The bank would give you what effectively works out to be an I.O.U. for however many pieces of gold you deposited into the bank. So instead of trading the actual pieces of gold, people just traded the I.O.U.'s. This is how paper money was invented.

But people became greedy. Governments began switching over to something called legal tender and establishing a fiat currency. This is what every country in the world uses today. Instead of your money being valuable because it is tied to something that is generally considered inherently valuable, such as gold, governments now just print pieces of paper, point a gun to your head and demand that you treat it like gold. You are legally required to accept dollars as payment. That's why all United States dollars are marked "THIS NOTE IS LEGAL TENDER FOR ALL DEBTS PUBLIC AND PRIVATE".

This is what people mean when they say a currency is "backed by a government's name". It's not backed by something considered genuinely valuable, like gold, but is instead backed up by the gun of the government.

The world today is not running off of real money, but something that has been imposed on us against our will. This gives government a dangerous power over people, opening us to the governments manipulation of the economy and its theft via inflation. This currency is weak, and when times get hard, people will abandon the dollar in what is known as a "flight into real values".

And that's essentially what money is, how it works, and why we do not have it today.