I'm guessing you're referring to "The Lack of Major Wars May Be Hurting Economic Growth"
I have posted a response at: http://ecologicalheadstand.blogspot.com/2014/06/war-is-health-of-gdp.html War is the Health of the GDP The headline of Tyler Cowen's Upshot piece, "The Lack of Major Wars May Be Hurting Economic Growth <http://www.nytimes.com/2014/06/14/upshot/the-lack-of-major-wars-may-be-hurting-economic-growth.html?_r=0>" is calculated to provoke controversy. Cowen's point, though, isn't that we need a war to boost the economy. As he concludes: "Living in a largely peaceful world with 2 percent G.D.P. growth has some big advantages that you don't get with 4 percent growth and many more war deaths." But there is an underlying logic to Cowen's *reductio ad absurdum* that I'm not sure he grasps completely. The national income accounts were *designed* with the idea of paying for war in mind. That actually might make sense during a time of war when you're trying to figure out how to pay for it. But it embeds a social accounting protocol that is incompatible with the absence of war. The predictable results are policies such as the Cold War rearmament based on the premise that arms spending will pay for itself by siphoning off revenues from the additional growth that the spending will stimulate. The Latin term for it is *inflatio. *Time to recycle a piece from three years ago: *Siphoning Off a Part of the Annual Increment of GNP* The lessons drawn from World War II by US policy makers and their advisers stand in stark contrast to those drawn from World War I by Stephen Leacock and prescribed by Keynes during the war. Where Leacock had seen the maintenance of industrial output despite vast withdrawals of manpower from the labor force as a sign of the redundancy of much of that labor force, Leon Keyserling, chairman of the Council of Economic Advisers under President Truman, viewed massive spending on armaments as a tonic to stimulate the expansion of economic activity. Keyserling went even further in his calculation of the economic benefits of the preparations for war. In his view, the increased economic activity could produce a "growth dividend" that could be "siphoned off" to pay for the arms. Rearmament would thus be a free lunch that would not only pay for itself but make a down payment on a bargain dinner. This reasoning underpinned National Security Council memorandum, NSC-68, written in 1950 by State Department analyst Paul Nitze. Keyserling supplied the economic vision underlying NSC-68, which represented a "a serious effort to develop a coherent strategy" in response to two distinct but interrelated problems: first, the obstacles to rebuilding an open system of world trade in which the US could sell its exports and second, containment of the Soviet military and political threat. "With a high level of economic activity," the report assured, "the United States could soon attain a gross national product of $300 billion per year… Progress in this direction would permit, and might itself be aided by, a build up of the economic and military strength of the United States and the free world." The deficit financing of this military build up and subsequent effect of that spending on economic growth meant, in its author's opinion, that the rearmament could occur, "without a decrease in the national standard of living because the required resources could be obtained by siphoning off a part of the annual increment in the gross national product." continued at: http://ecologicalheadstand.blogspot.com/2014/06/war-is-health-of-gdp.html On Sat, Jun 14, 2014 at 7:47 PM, Eugene Coyle <[email protected]> wrote: > he has topped himself in today's NYT. > > I would call for his institutionalization but he already is in one. > > Gene > > > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > -- Cheers, Tom Walker (Sandwichman)
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