The dollar has fallen 21% with respect to the Euro in the last year, of which 8% in the last couple of months and it currently continues to fall fast.
I do not follow the stock market but I believe it is also falling and the price of oil and gold are rising.
Read The Rise and Fall of the Great Powers for an exhaustive look at how wars great and small effect the long-term prospects for a country. Overall, wars are often ruinously expensive and tend to begger formerly great powers that overextend themselves. That said, there are a few historical examples of nations being better off because of war, the US in WWII being the best example. A special set of circumstances is required though:
In addition to WWII, two other good examples are the Union victory in the American Civil War, and the Swedish during the Forty Years War.
I’ve heard another part of the sustained growth in the U.S economy following WWII was due more to women who stayed in the full-time workforce than any sort of magical war growth hormone.
This isn’t necessarily a bad thing. When the dollar depreciates against the Euro, U.S. goods become to cheaper to Europeans, which would increase exports for the U.S.
You mean the Thirty Years War? If so, a reasonable example in some respects, but not in others. While the Swedish economy grew considerably with the acquisition of lucrative new territories and some industry prospered, the expense of such a sustained ( and heavily mercenary-dependant ) war was beyond the capacity of the Swedish crown to easily sustain. Even with French subsidies and the heavy taxation of occupied territories in northern Germany, the crown had to resort to selling off land to the nobility ( a policy continued by Queen Christina in the post-war years ), which hurt the long-term tax power of the state.
I wouldn’t call the Marshall Plan “so little”, myself…
The primary reason for rebuilding (western) Germany and Japan boils down to enlightened self-interest. Helping them become prosperous again greatly reduced the chances that they would start another war against the US or turn to the Soviet Union for help. And it worked.
Wars are expensive luxuries. Until the late 17th century, nations would tax and spend to fund wars. When the money ran out, they’d make peace. They would also borrow money from private individuals (e.g. try Googling the Fuggers of Augsburg) but the catch was that they would often default on their debts and ruin the creditors, as the Hapsburg kings of Spain did on more than one occasion. This meant that borrowing was always costly, at ruinous interest rates.
Then the English invented the Bank of England and accountable government. The latter was key, it meant that governments could not default on debts without personal cost to the members of the government, and that the state’s financial obligations had to be met. The Bank of England managed the government’s debt through bonds and assorted securities. The bearers could earn interest on the debt and could sell it (the debt) on to other investors (we call them gilt edged securities now). This allowed England to finance the hundred years of regular war against France from c. 1690 to 1815 through debt. It allowed massive subsidies to allies (Prussia, Russia, Austria) as well as financing a huge navy and medium sized army. This was noted by England’s enemies, principally France, who tried to set up their own financial infrastructure in the same way. However, as these were all absolute monarchs, with no accountability, monarchs would still cheat, default on debts and generally mismanage their countries’ economies. They still ran out of money and, with one notable exception, France was on the losing side of every war against England.
The British National Debt originated during the Wars of Austrian and Spanish Succession in the late 17th/early 18th centuries. It is still with us, added to by every war since. The First and Second World Wars destroyed the system for Britain because the cost of the wars was beyond Britain’s capacity to fund by the traditional methods. They crippled Britain’s economy to the extent that, arguably, it only started to recover in the late 1980’s.
The USA was exceptionally lucky, as previous posters have pointed out. Its enemies (Germany, Japan and Italy) were economically far weaker than itself and its principal ally, the British Empire. (Not sure about the strength of the USSR’s economy, my WAG is that it was weaker than Germany but stronger than Italy or Japan.)
The USA could afford to fight the war but only though debt, which is the traditional capitalist way. IIRC, the cost of World War Two is the principal source of the US National Debt.
Wars ruin economies, particularly non-capitalist economies, which lack the financial infrastructure to fund and manage huge government debt. The apparent profitability of British and US wars was achieved by deferring the cost (UK War Bonds from World War One are still traded in the UK, they have no redemption date) and by being financially much stronger than the opposition.
Oh, and winning helps, a lot.
:smack:
What’s bad for the economy right now is uncertainty. A possible war in Iraq is one source of that uncertainty, as is the possibility of terrorism, unrest in Venezuala, tensions with South Korea, and the lingering financial fallout from Enron-type accounting scandals and the dot-com bust. All of those factors discourage people from making long term business plans.
Crafter: Wars and natural disasters are not zero-sum games. They are negative-sum games. Resources are actually destroyed.
I agree with the OP. We were taught that war brings prosperity, esp. after WWII. Not to hijack the thread, but then why were was the US (supposedly) a lean, mean fightin’ machine under Reagan (manufacturing Congress’ fear about the Commies outnumbering our fleets, etc.)
And now, paradoxically, when we’re really at war (Afgan. and other pending threats including N. Korea) our economy is as limp as a wet noodle? Lastly, the reply about gas prices: a) Gas prices could spike even without a war. b) Is that to say that if gas prices are high enough in the US, the US entrepeneurs in manufacturing won’t be mass producing anything, even war-related technologies?
Could there be something more to the story than meets the eye?
Jinx, as various people in the thread have suggested, the “something more to the story than meets the eye” is that the “war is good for the economy” truism just isn’t true.