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Part I of II by Claudio Grass

For any reasonably well read adult, any amateur student of history or any responsible citizen for that matter, the idea that ”war is the health of the State” should be adjacent to a truism. After all, literally nobody benefits from violence and bloodshed apart from those at the heart of any State that is directly or indirectly involved and their cronies. In fact, the more horrific the violence and the more protracted the bloodshed, the greater the profit they reap. Even if they find themselves on the losing side of a particular conflict, they are still the “winners”, compared to the mere mortals, the innocent civilians that die, starve and suffer as a direct result of choices that “their betters” made for them. 

However, no matter how obvious this might be and how frequently and consistently proven throughout history, it is still surprising to hear it admitted openly and callously by the elected representatives of such a State. Earlier this month, when Joe Biden requested more than $105 billion from the US Congress for military aid to Ukraine, Israel, and Taiwan, he made an astounding argument to defend his position. He argued that war is good for American businesses and therefore good for the country. 

“We send Ukraine equipment sitting in our stockpiles. And when we use the money allocated by Congress, we use it to replenish our own stores, our own stockpiles, with new equipment. Equipment that defends America and is made in America. Patriot missiles for air defense batteries, made in Arizona. Artillery shells manufactured in 12 states across the country, in Pennsylvania, Ohio, Texas. And so much more.”

Before we even attempt to wrap our heads around the astonishing perversion of any moral fiber that the formation this trail of thought requires, let us quickly first shoot it down on logical grounds alone. First of all, if all this lethal equipment is just “sitting on stockpiles”, it means that these companies are dealing with a serious inventory problem. They overproduced, they overstocked, they forecasted wrong, they made bad deals and the generally conducted bad business. 

Much like the banks that went bust, they are now receiving a bailout from the taxpayer, who will be forced to foot the bill for equipment they obviously had no need for themselves – then they’ll gift it to other nations, that equally obviously couldn’t or wouldn’t to buy it themselves. These companies will then be guaranteed fresh cashflows, to produce “newer and better” instruments of death and destruction for their own country, that also nobody asked for. 

But even if we look past these “technicalities” that underpin the US President’s argument and we just focus on the larger point, that military spending is like any stimulus spending and therefore good for the economy, there is still something fundamentally wrong with that claim too (and it’s not just the fact that it is based upon widely debunked Keynesian premises). The idea that spending money on fixing, updating or otherwise restoring things is central to Frédéric Bastiat’s “broken window fallacy”, which he first outlined in his essay “That Which Is Seen and That Which Is Not Seen”.

As explained by Connor O’Keeffe in a recent analysis on, “the broken window fallacy is the false belief that spending money on restoring things that have been destroyed can make an economy richer. To make this point, Bastiat used the example of a broken shop window. After his careless son breaks a pane of glass, a shopkeeper is forced to hire a glazier to repair the damage. A group of bystanders reflect on the situation and question their impulse to condemn the boy. After all, they ask, “what would become of the glaziers if panes of glass were never broken?”….The bystanders point to all the economic activity that will come from the shopkeeper’s purchase of a new $50 windowpane. “The glazier will have $50 more to spend with other merchants, and these in turn will have $50 more to spend with still other merchants, and so ad infinitum.” That leads the crowd to the fallacious conclusion that because of all the resulting economic activity that his breaking of the window incited, the shopkeeper’s son should be considered a public benefactor.”

Of course, this is utter nonsense. If the window never broke, the shopkeeper would be free to spend that money on something that would actually benefit him or his business, but now it is a mere net loss. To take this argument to its logical conclusion, we should all be going around damaging other people’s property, creating destruction left and right and wreaking havoc in our path, as a way to help our communities and stimulate the economy. 

———- END PART 1

In the upcoming second part, we’ll focus on the moral implications and on the erroneous idea that the impact of war can be contained and perpetually be “somebody else’s problem”

Claudio Grass, Hünenberg See, Switzerland

This article has been published in the Newsroom of pro aurum, the leading precious metals company in Europe with an independent subsidiary in Switzerland. 

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