- Does Capitalism Require War? / Artikel mises.org - - Elli -, 10.04.2003, 18:34
- Hatten wir heute oder gestern schonmal, ist aber schoener formatiert:) (owT) - SchlauFuchs, 10.04.2003, 18:38
- oops, ich kriege nicht mehr alles mit ;-) (owT) - - Elli -, 10.04.2003, 18:47
- Hatten wir heute oder gestern schonmal, ist aber schoener formatiert:) (owT) - SchlauFuchs, 10.04.2003, 18:38
Does Capitalism Require War? / Artikel mises.org
-->Ich habe es nicht gelesen (zu wenig Zweit), vorsichtshalber distanziere ich mich davon ;-)
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<font color="#002864" size="1" face="Verdana">http://www.mises.org/fullstory.asp?control=1201</font>
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<font face="Verdana" size="2"><font color="#002864"><strong><font size="5">Does Capitalism Require War?</font></strong></font>
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<font size="4">by D.W. MacKenzie</font>
[Posted April 10, 2003]
[img][/img] Of
all the false charges leveled against capitalism, the indictment of promoting
or requiring imperialism and warfare is most certainly the least deserved.
Given recent events, this proposition has received much undeserved attention,
but is by no means new. This claim has a long legacy, tracing back at least to
19<sup>th</sup> century critics of Political Economy.
J.A. Hobson claimed that capitalism concentrates too much wealth into too
few hands. Capitalists employ the smallest number of workers so as to keep
wages low. This leads to oversaving and underconsumption in capitalist nations,
as the rich can consume only so much. The supposed capitalist solution to this
alleged problem is aggressive imperialist expansion. Hobson sought third-way
reforms of capitalism as an alternative to perceived capitalist imperialism.
Karl Marx claimed that capitalism keeps wages at a subsistence level with a
reserve army of the unemployed. Followers of Marx, like Lenin and Bukharin,
claimed the profits of capitalism 'cannot' be invested domestically.
Capitalists even conspire to promote war, as a means of reaping grim profits
from armaments production.
Earlier this century, J.M. Keynes established greater respectability for
the notion that capitalism underemploys workers. His Principle of Effective
Demand enamored a generation of economists, and still has a few ardent
parishioners. For instance, Paul Krugman claims that the Second World War has
had positive affects. WWII spending supposedly got us out of the Great
Depression by removing our inhibitions towards public spending. Krugman has
also claimed (in the New York Times) that the September 11<sup>th</sup>
attacks might improve economic conditions by stimulating business investment.
Krugman seems to believe in a kind of destructive creation where prosperity
emerges from devastation.
Perhaps the oddest aspect of these various, but similar, claims is that
their proponents appeal so often to historical examples. They often claim that
history shows how capitalism is imperialistic and warlike or at least benefits
from war. Capitalism supposedly needs a boost from some war spending from time
to time, and history shows this. Robert Higgs demonstrated that the wartime
prosperity during the Second World War was illusory<a title href="http://www.mises.org/fullstory.asp?control=1201#_edn1" name="_ednref1"></a>.
This should come to no surprise to those who lived through the deprivations of
wartime rationing. We do not need wars for prosperity, but does capitalism
breed war and imperialism anyway?
History is rife with examples of imperialism. The Romans, Alexander, and
many others of the ancient world waged imperialistic wars. The Incan Empire
and the empire of Ancient China stand as examples of the universal character
of imperialism. Who could possibly claim that imperialism grew out of the
prosperity of these ancient civilizations? Imperialism precedes modern
industrial capitalism by many centuries. Uneven wealth distribution or
underconsumption under capitalism obviously did not cause these instances of
imperialism. Of course, this fact does not prove that modern capitalism lacks
its own imperialistic tendencies.
The notion that income gets underspent or maldistributed lies at the heart
of most claims that capitalism either needs or produces imperialistic wars. As
J.B. Say argued, supply creates its own demand through payments to factors of
production. Demand Side economists Hobson and Keynes argued that there would
be too little consumption and too little investment for continuous full
employment. We save too much to have peace and prosperity.
The difficulty we face is not in oversaving, but in underestimating the
workings of markets and the desires of consumers. Doomsayers have been
downplaying consumer demand for ages. As demand side economist J.K. Galbraith
claimed, we live in an affluent society, where most private demands have been
met. Of course, Hobson made the same claim much earlier. Earlier and stranger
still, mercantilists claimed that 'wasteful acts' such as tea drinking,
gathering at alehouses, taking snuff, and the wearing of ribbons were
unnecessary luxuries that detracted from productive endeavors.
The prognostications of esteemed opponents of capitalism have consistently
failed to predict consumer demand. Today, consumers consume at levels that few
long ago could have imagined possible. There is no reason to doubt that
consumers will continue to press for ever higher levels of consumption. Though
it is only a movie, Brewster's Millions illustrates how creative people can be
at spending money. People who do actually inherit, win, or earn large sums of
money have little trouble spending it. Indeed, wealthy individuals usually
have more trouble holding on to their fortunes than in finding ways to spend
them. We are never going to run out of ways to spend money.
Many of the complaints about capitalism center on how people save too much.
One should remember that there really is no such thing as saving. Consumers
defer consumption to the future only. As economist Eugen Böhm-Bawerk
demonstrated, people save according to time preference. Savings diverts
resources into capital formation. This increases future production. Interest
enhanced savings then can purchase these goods as some consumers cease to
defer their consumption.
Keynes' claim that animal spirits drive investment has no rational basis.
Consumer preferences are the basis for investment. Investors forecast future
consumer demand. Interest rates convey knowledge of these demands. The
intertemporal coordination of production through capital markets and interest
rates is not a simple matter. But Keynes' marginal propensities to save and
Hobson's concentration of wealth arguments fail to account for the real
determinants of production through time.
Say's Law of Markets holds precisely because people always want a better
life for themselves and those close to them. Falling interest rates deter
saving and increase investment. Rising interest rates induce saving and deter
investment. This simple logic of supply and demand derives from a quite basic
notion of self interest. Keynes denied that the world worked this way. Instead,
he claimed that bond holders hoard money outside of the banking system,
investment periodically collapses from 'the dark forces of time and
uncertainty, and consumers save income in a mechanical fashion according to
marginal propensities to save. None of these propositions hold up to scrutiny,
either deductive or empirical.
Speculators do not hoard cash outside of banks. To do this means a loss of
interest on assets. People do move assets from one part of the financial
system to another. This does not cause deficient aggregate demand. Most money
exists in the banking system, and is always available for lending.
In fact, the advent of e-banking makes such a practice even less sensible.
Why hoard cash when you can move money around with your computer? It is common
knowledge that people save for homes, education, and other expensive items,
not because they have some innate urge to squirrel some portion of their
income away. This renders half of the market for credit rational.
Investors do in fact calculate rates of return on investment. This is not a
simple matter. Investment entails some speculation. Long term investment
projects entail some uncertainty, but investors who want to actually reap
profits will estimate the returns on investment using the best available data.
Keynes feared that the dark forces of time and uncertainty could scare
investors. This possibility, he thought, called for government intervention.
However, government intervention (especially warfare) generally serves to
increase uncertainty. Private markets have enough uncertainties without
throwing politics into the fray. The vagaries of political intervention serve
only to darken an already uncertain future. Capital markets are best left to
capitalists.
Nor is capital not extracted surplus value. It comes not from exploitation.
It is simply a matter of people valuing their future wellbeing. Capitalists
will hire workers up to the point where the discounted marginal product of
their labor equals the wage rate. To do otherwise would mean a loss of
potential profit. Since workers earn the marginal product of labor and capital
derives from deferred consumption, Marxist arguments about reserve armies of
the unemployed and surplus extraction fail.
It is quite odd to worry about capitalists oversaving when many complain
about how the savings rate in the U.S. is too low. Why does the U.S., as the
world's 'greatest capitalist/imperialist power', attract so much foreign
investment? Many Americans worry about America's international accounts. Fears
about foreigners buying up America are unfounded, but not because this does
not happen. America does have a relatively low national savings rate. It does
attract much foreign investment, precisely because it has relatively secure
property rights. Indeed, much of the third world suffers from too little
investment. The claims of Marxists, and Hobson, directly contradict the
historical record. Sound theory tells us that it should. The Marxist claim
that capitalists must find investments overseas fails miserably.
Larry Kudlow has put his own spin on the false connection between
capitalism and war. We need the War as shock therapy to get the economy on its
feet. Kudlow also endorses massive airline subsidies as a means of restoring
economic prosperity.
Kudlow and Krugman both endorse the alleged destructive creation of warfare
and terrorism. Kudlow has rechristened the Broken Window fallacy the Broken
Window principle. Kudlow claims that may lose money and wealth in one way, but
we gain it back many time over when the rebuilding is done. Kudlow and Krugman
have quite an affinity for deficits. Krugman sees debt as a sponge to absorb
excess saving. Kudlow see debt as a short term nuisance that we can dispel by [i]maximizing
growth. One would think that such famous economists would realize that
competition does work to achieve the goal of optimum growth based on
time preference, but this is not the case.
While these economists have expressed their belief in writing, they could
do more. If the destruction of assets leads to increased prosperity, then they
should teach this principle by example. Kudlow and Krugman could, for instance,
help build the economy by demolishing their own private homes. This would have
the immediate effect of stimulating demand for demolition experts, and the
longer term affect of stimulating the demand for construction workers. They
can create additional wealth by financing the reconstruction of their homes
through debt. By borrowing funds, they draw idle resources into use and
stimulate financial activity. Of course, they would both initially lose wealth
in one way. But if their thinking is sound, they will gain it back many times
over as they rebuild.
The truth is that their beliefs are fallacious. Bastiat demonstrated the
absurdity of destructive creation in his original explanation of the
opportunity costs from repairing broken windows.
Kudlow is quite clear about his intentions. He wants to grow the economy to
finance the war. As Kudlow told some students,"The trick here is to grow
the economy and let the economic growth raise the revenue for the war
effort"<a title href="http://www.mises.org/fullstory.asp?control=1201#_edn2" name="_ednref2">[ii]</a>.
Kudlow also praises the Reagan Administration for growing the economy to fund
national defense. Here Kudlow's attempts to give economic advice cease
completely. His argument here is not that capitalism needs a shot in the arm.
It is that resources should be redirected towards ends that he sees fit.
Kudlow is a war hawk who, obviously, cannot fund this or any war personally.
He instead favors using the state to tax others to fund what he wants, but
cannot afford. He seems to think that his values matter more than any other's.
Why should anyone else agree with this?
Kudlow tarnishes the image of laissez faire economics by parading his
faulty reasoning and his claims that his wants should reign supreme as
a pro-market stance. Unfortunately, it is sometimes necessary to defend
capitalism from alleged advocates of liberty, who employ false dogmas in
pursuit of their own militaristic desires.
Capitalism neither requires nor promotes imperialist expansion. Capitalism
did not create imperialism or warfare. Warlike societies predate societies
with secure private property. The idea that inequity or underspending give
rise to militarism lacks any rational basis. Imperialistic tendencies exist
due to ethnic and nationalistic bigotries, and the want for power. Prosperity
depends upon our ability to prevent destructive acts. The dogma of
destructive creation fails as a silver lining to the cloud of warfare.
Destructive acts entail real costs that diminish available opportunities.
The idea that we need to find work for idle hands in capitalism at best
leads to a kind of Sisyphus economy where unproductive industries garner
subsidies from productive people. At worst, it serves as a supporting argument
for war. The more recent versions of the false charges against capitalism do
nothing to invalidate two simple facts. Capitalism generates prosperity by
creating new products. War inflicts poverty by destroying existing wealth.
There is no sound reason to think otherwise.
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<font?="true" Old="true" Bookman="true">D.W. MacKenzie is a graduate
student in economics at George Mason University. Send him MAIL and
see his Mises.org Daily
Articles Archive. </font>
N. Bukharin and E. Preobrazhensky. <em>The ABC of Communism.</em>
Robert Higgs. 1992. "Wartime Prosperity? A Reassessment of the
U.S. Economy in the 1940s", The Journal of Economic History,
52 (1) pp. 41-60.
John A. Hobson. 1902. <em>Imperialism</em>, James Pott and Co. New
York.
Paul Krugman"Stocks and Bombs<span class="767470413-10042003">,</span>" New
York Times<span class="767470413-10042003">,</span> September 13, 2002.
<em>Bombs (<span class="767470413-10042003">A</span>lready) <span class="767470413-10042003">A</span>way<span class="767470413-10042003">,</span></em>
Lawrence Kudlow:
<ul>
~ http://www.jewishworldreview.com/cols/kudlow091702.asp
~ http://www.townhall.com/columnists/larrykudlow/lk20030206.shtml
~ http://www.shemano.com/kudlow/kudlow.htm</li>
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Imperialism, the Highest Stage of Capitalism, Lenin, 1916.
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<a title href="http://www.mises.org/fullstory.asp?control=1201#_ednref1" name="_edn1">[i]</a>
See Higgs, Robert (1992).
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<a title href="http://www.mises.org/fullstory.asp?control=1201#_ednref2" name="_edn2"></a><sup><sup><font color="blue">[ii]</font></sup></sup> Kudlow
made this remark at Tusculum College.
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