|
It is no
secret that as the Fed's centrally-planned New Normal has unfolded, one
after another central-planner and virtually all economists, have been
caught wrong-footed with their constant predictions of an
"imminent" economic surge, any minute now, and always just around
the corner. And yet, nearly six years after Lehman, five years after the
end of the last "recession" (even as the depression for most
rages on), America is about to have its worst quarter in decades (excluding
the great financial crisis), with a -2% collapse in GDP, which has been
blamed on... the weather.
That's
right: economists are the only people who will look anyone in the eye, and
suggest that it was harsh weather that smashed global trade, pounded retail
sales (in the process freezing the internet because people it was so cold
nobody shopped online), and even with soaring utility usage and the
Obamacare induced capital misallocation still led to world's largest
economy to a 5% plunge from initial estimates for 3% growth in Q1. In other
words, a delta of hundreds of billion in "growth lost or
uncreated" due to, well, snow in the winter.
Sadly for
the same economists, now that Q2 is not shaping up to be much better than
Q1, other, mostly climatic, excuses have arisen: such as El Nino, the
California drought, and even suggestions that, gasp, as a result of the
Fed's endless meddling in the economy, the terminal growth rate of the
world has been permanently lowered to 2% or lower.
What is
sadder for economists, even formerly respectable ones, is that overnight it
was none other than Tyler Cowen who, writing in
the New York Times,
came up with yet another theory to explain the "continuing slowness
of economic growth in high-income economies." In his own words:
"An additional explanation of slow growth is now receiving attention,
however. It is the persistence and expectation of peace."
That's right
- blame it on the lack of war!
The world
just hasn’t had that much warfare lately, at least not by historical
standards. Some of the recent headlines about Iraq or South Sudan make our
world sound like a very bloody place, but today’s casualties pale in light
of the tens of millions of people killed in the two world wars in the first
half of the 20th century. Even the Vietnam War had many more deaths than
any recent war involving an affluent country.
Well, that's
just unacceptable: surely all the world needs for some serious growth is
for war casualties to be in the billions, not in the paltry hundreds of
thousands.
Keynesianism
101 continues:
Counterintuitive
though it may sound, the greater peacefulness of the world may make the
attainment of higher rates of economic growth less urgent and thus less
likely. This view does not claim that fighting wars improves economies, as
of course the actual conflict brings death and destruction. The claim is
also distinct from the Keynesian argument that preparing for war lifts
government spending and puts people to work. Rather, the very possibility
of war focuses the attention of governments on getting some basic decisions
right — whether investing in science or simply liberalizing the economy.
Such focus ends up improving a nation’s longer-run prospects.
To be sure,
Cowen is quick covers his ass with some quick diplomacy. After all how dare
he implicitly suggest that the only reason the US escaped the Great
Depression is what some say was its orchestrated entry into World War 2:
It may seem
repugnant to find a positive side to war in this regard, but a look at
American history suggests we cannot dismiss the idea so easily. Fundamental
innovations such as nuclear power, the computer and the modern aircraft
were all pushed along by an American government eager to defeat the Axis
powers or, later, to win the Cold War. The Internet was initially
designed to help this country withstand a nuclear exchange, and Silicon
Valley had its origins with military contracting, not today’s
entrepreneurial social media start-ups. The Soviet launch of the Sputnik
satellite spurred American interest in science and technology, to the
benefit of later economic growth.
So what is
it about war that makes economic "growth" that much greater.
Apparently it has to do with an urgency in spending. As in urgently
spending more than the trillions of dollars needed to support the US
welfare state now, and spending even more trillions in hopes of, you
guessed it, stumbling on the next "Internet" (which apparently
wasn't created by Al Gore).
War brings
an urgency that governments otherwise fail to summon. For instance, the
Manhattan Project took six years to produce a working atomic bomb, starting
from virtually nothing, and at its peak consumed 0.4 percent of American
economic output. It is hard to imagine a comparably speedy and decisive
achievement these days.
What we find
surprising is that it took the econofrauds this long to scapegoat that last
falsifiable boundary - the lack of war - for the lack of
growth. But they are finally stirring:
Ian Morris,
a professor of classics and history at Stanford, has revived the hypothesis
that war is a significant factor behind economic growth in his recent book,
“War! What Is it Good For? Conflict and the Progress of Civilization From
Primates to Robots.” Morris considers a wide variety of cases, including
the Roman Empire, the European state during its Renaissance rise and the
contemporary United States. In each case there is good evidence that the
desire to prepare for war spurred technological invention and also brought
a higher degree of internal social order.
Another new
book, Kwasi Kwarteng’s “War and Gold: A 500-Year History of Empires,
Adventures, and Debt,” makes a similar argument but focuses on capital
markets. Mr. Kwarteng, a Conservative member of British Parliament, argues
that the need to finance wars led governments to help develop monetary and
financial institutions, enabling the rise of the West. He does worry,
however, that today many governments are abusing these institutions and
using them to take on too much debt. (Both Mr. Kwarteng and Mr. Morris are
extending themes from Azar Gat’s 820-page magnum opus, “War in Human
Civilization,” published in 2006.)
Yet another
investigation of the hypothesis appears in a recent working paper by the
economists Chiu Yu Ko, Mark Koyama and Tuan-Hwee Sng. The paper argues that
Europe evolved as more politically fragmented than China because China's
risk of conquest from its western flank led it toward political
centralization for purposes of defense. This centralization was useful at
first but eventually held China back. The European countries invested more
in technology and modernization, precisely because they were afraid of
being taken over by their nearby rivals.
The fun part
will be when economists finally do get their suddenly much desired war
(just as they did with World War II, and World War I before it, the
catalyst for the creation of the Fed of course), just as they got their
much demanded trillions in monetary stimulus. Recall that according to
Krugman the Fed has failed to stimulate the economy because it simply
wasn't enough: apparently having the Fed hold 35% of all 10 Year
equivalents, injecting nearly $3 trillion in reserves into the stock
market, and creating a credit bubble that makes the 2007 debt bubble pale
by comparison was not enough. One needs moar!
And so it
will be with war. Because the first war will be blamed for having been too
small - it is time for a bigger war. Then an even bigger war. And so on,
until the most worthless human beings in existence - economists of course -
get their armageddon, resulting in the death of billions. Perhaps only then
will the much desired GDP explosion finally arrive?
Luckily for
Cowen, he stops from advocating war as the ultimate panacea to a slow
growth (at least for now: once the US enters a recession with a nother
quarter of negative growth, one can only imagine what lunacy Krugman
columns will carry). Instead he frames it as an issue of trade offs:
"We can prefer higher rates of economic growth and progress, even
while recognizing that recent G.D.P. figures do not adequately measure all
of the gains we have been enjoying. In addition to more peace, we also have
a cleaner environment (along most but not all dimensions),more leisure
time and a higher degree of social tolerance for minorities and formerly
persecuted groups. Our more peaceful and — yes — more slacker-oriented
world is in fact better than our economic measures acknowledge."
And let's
not forget that GDP is nothing but economic bullshit, confirmed when in
recent weeks Europe - seemingly tired of waiting for war - arbitrarily
decided to add the "benefits" of prostitution and narcotics. And
there you have all the meaningless growth you can dream of. If only on
paper. Because hundreds of million of people in the developed world,
without a job, out of the labor force, can only be placated with dreams of
"hope and change" for so long. And certainly not once they get
hungry, or realize that the biggest lie of all in the Bismarckian welfare
state - guaranteed welfare - is long broke.
Cowen's
conclusion:
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. Economic stasis may not feel very impressive, but it’s
something our ancestors never quite managed to pull off. The real questions
are whether we can do any better, and whether the recent prevalence of
peace is a mere temporary bubble just waiting to be burst.
That's
great. Now all we need is some economist and/or central-planner who
actually gets top billing and determines policy to have a different
conclusion, and decide that 4% growth is actually worth m(b)illions of dead
people.
Judging by
recent events in Ukraine and the middle-east that announcement may be just
around the corner.
|
No comments:
Post a Comment