All right, y'all, welcome to the Scott Horton Show.
I am the Director of the Libertarian Institute, Editorial Director of Antiwar.com, author of the book Fool's Errand, Time to End the War in Afghanistan, and I've recorded more than 5,000 interviews going back to 2003, all of which are available at scotthorton.org.
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The full archive is also available at youtube.com slash Scott Horton Show.
All right, you guys, on the line, I've got the great Tom Woods.
He is the host of the Tom Woods Show at tomwoods.com.
Welcome back to the show.
Tom, how are you doing?
I'm doing great, Scott.
Very glad to be with you.
Very happy to have you here.
And you know, as Luke Skywalker said to Obi-Wan Kenobi's ghost, why didn't you tell me?
You had written this whole giant, awesome thing called the Pentagon Versus the Economy.
This ebook that I guess you give away to people when they subscribe to your daily email update.
And this thing is absolutely magnificent.
Oh, thank you.
I only wish I could download it directly into people's brains like the Lawnmower Man.
Great job.
I wish I could download it.
Thank you so much.
I appreciate this.
I wish I could download your...
If we could download your brain into other people's brains, problem solved.
But sure, I'll take the ebook.
Yeah, I don't know.
I guess I'm just not the...
I wouldn't say I'm not the bragging type.
That'd be a lie.
But I guess I just didn't think to tell you.
I apologize.
Yeah, no problem.
You know what?
I publish articles at the Libertarian Institute that are perfect to run on antiwar.com, but then those neurons just don't talk to each other and I'll completely forget to do it.
So just who knows.
I allow for mistakes on others' parts in that same vein, since I make so many myself.
The thing is, I write a lot of these free ebooks and I have a different domain name for each one.
So the question was, what was the domain name going to be for the Pentagon versus the economy?
That's way too long.
So somebody came up with militaryeconomy.com and that's what I went with, because that kind of gives you a sense of what's in it.
And what's also, I have to say, kind of satisfying about this particular ebook is that it can genuinely be read by anybody on any side of the aisle.
There's no partisanship in it at all, because obviously I don't really belong to either of the major parties anyway.
But there's nothing in here, even though you can hear some libertarian lingo in it, but anybody who really, really is up in arms about the warfare state and the military spending would find a lot in here to be happy about.
Yeah, I think you apply the Horton rule very well here, as Michael Baldwin calls it, I didn't name it that, of going at the right from the right in a way.
Where listen, if you want a sound capitalist economy, especially hard money, free of income taxation, how about stable so it doesn't crash every 10 years or so?
You've got to get rid of the warfare state.
You just have to.
You can't have it both ways.
Simple as that.
Yeah, yeah.
No kidding.
I'd like to say, actually, one thing that kind of satisfies me, since I really do want to reach beyond just the libertarian world, I do want other folks, I want to convert people and so on and so forth.
There's somebody who figures very heavily in this ebook, and he's somebody Rothbard liked very much, and I know that because at the Mises Institute we have Rothbard's library, and I found a book by this guy Seymour Melman in Rothbard's library, and he's written his usual mountain of comments in the margins, and he doesn't agree with him on everything, but he's very impressed by this guy.
Seymour Melman was a professor of industrial engineering at Columbia University.
So Seymour Melman's a very, very impressive guy.
So he definitely, if you had to classify him, he would say he's on the left.
His main insight, he had a bunch of them, because he had a book called Pentagon Capitalism, which if that hadn't been taken, I would have used that for the ebook.
Perfect title.
His main insight is really an insight that we get from Frederick Bastiat, what is seen and what is not seen.
So yeah, I know that you give people jobs when you build a lot of missiles, like we all get that, but he's saying what we have to bear in mind is what is not seen.
What are all the things that would have been built if these things hadn't been built?
And then more than that, he'll say, look at research and development.
It's not like if we siphon off one third of the research and development talent from the economy and put it into the military sector, that somehow that number is magically replaced by an infinite supply of geniuses that just replace ...
No, no, no.
That just means that now the economy is operating with one third fewer research and development people, with less talent.
And so that means that there's less innovation.
So he goes through and says, look, our capital stock is not being refreshed the way it might be because so much of the money and resources are being siphoned into the military.
And so he goes and looks at all the consequences of this.
So it's not enough to say, look at how many jobs there are in my district building this missile that we're never going to use because it turns out that it doesn't work, or this plane doesn't work, or it's supposed to be stealthy, but everybody can see it.
It's way, way more than that.
And of course, that's the point we've been trying to make about all government spending.
Yeah.
And so it really does come down to real basic Austrian school 101 stuff, which is really ...
It's unfortunate, I guess, to say the least, that the rest of economics doesn't start from the same kind of premises where they really do believe, Tom ...
I don't know.
I dropped out of college.
What do I know?
They really do believe that, hey, aggregate demand, man.
And that's all it is.
So if we are essentially building bombs, if our entire economy was geared around building bombs and then dropping them on Arabs and exploding them, then that would be fine, essentially.
There's no difference between that and growing food and then selling it to someone to eat.
Right.
Now, some of their people may say, we get that there's a moral problem with doing that, but strictly speaking, economically, it's not a problem.
The trouble is, if you go around saying that economically, it's all more or less equivalent, Well, there are fairly unscrupulous people who will say, okay then, it's open season.
The bombing begins at midnight or whatever.
I'm happy to say that I ended up sending this thing over to a couple of scholars who are kind of ...
They think of themselves as carrying on the legacy of Mellman.
They knew him personally.
And I said, look, I know you guys politically are a little bit different from me, but I think you're going to appreciate what I wrote here, because it's kind of a tribute to Mellman.
And they wrote back and said, this is just magnificent, what you've written.
And I do mention Bastiat, and they said, we had never heard of him, but we need to read more about him.
So, it's just great.
It's so rare these days to see people who may have different perspectives saying, hey, you had a really good insight there, and I appreciate that.
That used to happen, and now that people are dividing themselves into warring camps, it's more and more rare.
Yeah.
Hey, let me ask you this.
Do you happen to have the thing, the PDF file open in front of you there, Tom, or have the book in front of you there?
Let's see.
I do now.
Okay.
So, if you would please read from the bottom of page eight for a minute there, the paragraph beginning the scale of resources siphoned off.
This is just one of the most enlightening paragraphs or two I've read in a very long time here.
Okay.
The scale of the resources siphoned off from the civilian sector becomes more vivid in light of specific examples of military programs, equipment, and personnel.
To train a single combat pilot, for instance, costs between $5 million and $7 million.
Over a period of two years, the average US motorist uses about as much fuel as does a single F-16 training jet in less than an hour.
The Abrams tank uses up 3.8 gallons of fuel in traveling one mile.
Between two and 11% of the world's use of 14 important minerals, from copper to aluminum to zinc, is consumed by the military, as is about 6% of the world's consumption of petroleum.
The Pentagon's energy use in a single year could power all US mass transit systems for nearly 14 years.
Keep going.
Keep going.
Okay.
Sure.
I love this stuff.
This shocked me also.
Still, other statistics illuminate the scope of the resources consumed by the military.
According to the US Department of Defense, during the period from 1947 through 1987, it used, in constant dollars, $7.62 trillion in capital resources.
In 1985, the Department of Commerce estimated the value of the nation's plant, equipment, and infrastructure, capital stock, at just over $7.29 trillion.
In other words, the amount spent over that period could have doubled the American capital stock or modernized and replaced its existing stock.
Okay.
In other words, that even more.
Elaborate more and more on that point.
What exactly is this capital stock you're talking about, and what difference does it make here?
Well, we're talking about the part of the economy that's ...
A lot of times, people say consumption is 70% of the economy, and they think that when you and I go to the store, that's what really drives the economy.
There wouldn't be anything in the store if there weren't for a capital stock, because it's these capital goods that you and I don't buy.
You and I don't buy a drill press or an assembly line.
We don't buy a physical plant, a production facility.
We don't buy these sorts of things, a steam shovel, whatever.
These are things that are used to create consumer goods, and the more of them we have, the more inexpensive consumer goods we can enjoy, because the more capital stock you have, number one, the more goods you're able to pump out at lower cost, and number two, there are whole classes of goods that you could not create in the absence of capital goods.
This really is the engine of prosperity, because ...
In other words, imagine an economy without any capital goods.
You'd have to produce everything more or less by hand, and that means you'd have a real scarcity of goods.
They'd all be very expensive.
There's no way you could produce a television or any of those things.
Help me see the unseen here, then.
What does it mean that the Pentagon blew the equivalent of the entire capital stock of the country over that period of 40 years there?
It means that it's impossible to know the exact amount, but it means that we are paying enormously more for the things that we need than we would otherwise, and it means that innovation has been stifled, because maybe you can come up with a good idea, but without the abundance of resources to implement them, they don't see the light of day, but it's primarily that what drives the process by which we go from a primitive economy ...
Again, imagine an economy, let's say, 500 years ago.
In that economy, it doesn't matter if you increase the minimum wage to $50 an hour.
If there are no goods on the shelves, or very, very few, or the goods that are created are created by hand, and so only the rich can afford them, none of that matters.
No government intervention is going to fix that.
The economy is impoverished because its productive capacity is so low.
The more the productive capacity of the economy is expanded, the more goods can be produced at lower price for the masses, not just for the wealthy few.
That process was, if not halted at the very least, held back by half by the process of siphoning goods off into the military.
In other words, our economy is more primitive than it needs to be by a wide margin.
Hold on just one second.
Be right back.
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Okay, but you know we're all raised to believe, and maybe it's true Tom, that our entire way of life depends on our foreign policy.
And you know what?
How about let me put that not in a naive silly way like we'd all be speaking North Korean right now or something like that, but how about the way Paul Nitze put it in National Security Council Resolution 68 that our wealth and way of life and standard of living depends on being able to gangsterize the rest of the world out of their resources so that our small percentage of the population can continue to enjoy such a large percentage of the wealth of the planet?
Right.
Okay.
So there's a two-fold answer to that.
The first one is lamer than the second, but the first one is that in this particular book, I've said even if you, or at least I've implicitly said, even if you favor the current foreign policy for whatever reason, at least this book will let you understand that there are costs to it.
But the second part of it is, is that really necessary?
Think about all the countries in the world that don't have this kind of aggressive foreign policy, and yet somehow they seem to have managed to negotiate through normal trade arrangements to get all the things they need, right?
They've all managed to do this.
So you could look at Switzerland, very wealthy country.
You could look at, I mean, you look at all the tiny countries of Europe that even if they wanted to, I mean, could you imagine Monaco being able to do anything to anybody or Malta?
Malta is a wonderful place to live.
There's no way they could have a military strong enough to strong arm people and to give them the things they need.
It kind of reminds me of the argument that Western imperialism is what made the West rich.
Okay.
There was Western imperialism, and we should certainly be against that, but there are a lot of wealthy countries in the West that were never involved in imperialism.
And there are a lot of poor countries in the third world that were never imperially exploited.
So that doesn't explain enough.
So yeah, the US has done this and that, but you look at Canada and all these other countries with minimal to no serious interventionist foreign policy, and they're all doing fine.
So they're all a rebuke to this claim.
Yeah.
I mean, it's really kind of funny when you look at, there's that famous clip, it should be famous, of Ike Eisenhower saying, hey, listen, if Vietnam falls to the communists, then we might have to pay the market price for tungsten.
And that is just absolutely intolerable, right?
So then what did he do?
He instituted a program of war in Southeast Asia for the next 25 years that cost 100 bazillion dollars.
Right.
I'd rather have the expensive tungsten.
Seriously.
And not only that, but when something like that is expensive, all right, well, then that stimulates the search for substitutes or ways to use it more efficiently.
I mean, that's the lesson, of course, of the bet between Paul Ehrlich and Julian Simon over the price of certain minerals.
Julian Simon let Paul Ehrlich pick five things, and he says, now, 10 years from now, in inflation-adjusted terms, I'm telling you, they're all going to be cheaper, because we'll find substitutes, we'll use them more efficiently, whatever.
And Ehrlich said, oh, no, no, no, the world is ending and the sky is falling.
And Simon was right, not just on one or two of them, he was right on all five.
So even if you did pay a little bit more for tungsten, not only is that way cheaper than this ridiculous military apparatus, but in the long run, what tends to happen is what happened with poor Paul Ehrlich.
Yeah.
And, you know, David Stockman gets mad as hell about the oil, the way they argue that we have to be the hegemon of the Middle East in order to get the oil, and he just screams that the only solution to high oil prices is high oil prices.
You dummies.
I mean, this is capitalism, not even 101.
This is walking down the hallway into capitalism class, is high prices spurs new supply.
It'll work itself out.
It'll be fine.
We don't need to spend one dime over there.
Certainly not for the oil.
Yeah.
I think, especially since the U.S. is doing pretty well with oil, I think the reason that the U.S. wants to control oil supplies is not so much that it feels like it has to provide for its own energy use, as much as it is, it thinks that it's in a geopolitical rivalry with other countries, particularly China, and it wants to divert those resources away from China.
I think that's the more likely explanation.
Absolutely right.
In fact, I got some footnotes like that in my book.
Talk about that.
Okay, now, what about the research and development?
Because it's easy for me, with my broken window understanding self, to say that, look, all of these brilliant scientists should be coming up with new ways to distribute goods and services to people, you know, instead of new ways to kill people, especially in these completely ridiculous, phony, no-win wars that are mostly just waged as an excuse to spend this money in the first place.
The hawks say, nah-uh, because what about jets, and what about microchips, and what about the whole internet and everything?
If it wasn't for the Pentagon, we'd all still be living in the 1950s technologically somehow.
Right, right, right.
So this is what's called crossover, that the government, the military, they have some innovation, and it spills over into consumer use.
So this has been a debate among people for a long time, and the question is, how much crossover is there?
And estimates range anywhere from, on the low end, 5% to, on a high end, one-third.
Melman naturally is inclined more toward the lower end of that number.
But then you have to ask yourself, well, how many of these things would have occurred anyway?
You know, how many of these, I mean, are you really telling me that we would never have had the internet, and no one would ever have figured this out?
That's not plausible.
And so how can we really assess this?
How can we know what makes sense to it?
Well, the way I look at it is this.
We could have had, in the year 1807, if we had taken all the resources in society and said, we're going to create an iPad.
Now, maybe if you took every single productive resource, every genius brain, every excess dollar, all people's savings, all the money brought in by governments, maybe if you would combine all that in the entire world, you could have developed the iPad in 1807.
But do you see how ridiculous it would be to develop it in 1807?
It would be absurdly impoverishing.
Wait until the economy is wealthy enough to create the iPad, because otherwise, obviously that's not what people prefer in 1807, even though it would be a cool gadget to have.
So likewise, just saying, well, we've accelerated this or that development, OK, but in the same way that I wouldn't want an iPad in 1807, because it would impoverish me, I want the market to tell me when society is wealthy enough and ready for a particular development.
But also on the general subject of research and development, do you mind if I, they'll be super quick, but can I share a couple of quick passages from the ebook?
Of course.
Absolutely.
OK.
All right.
So the first one, this is from Seymour Mellman himself, the guy we've been talking about.
And he's talking about, he's saying that basically anywhere since World War II, between one third and two thirds of all technical researchers in the United States have been working for the military at any given time.
And here's some of his commentary on that.
He says, when research and development is not properly done on behalf of civilian industry, results like poor product design or poor production methods can have disastrous effects on the economic position of the industry.
When as little as one and a half percent of U.S. national product is diverted to military research, it seems little enough.
But that accounts for more than half of the national research and development effort and has left many U.S. civilian products industries at a competitive disadvantage due to faltering product designs and insufficient improvement in industrial production efficiency.
And then one other thing.
This is the Wall Street Journal in 1963.
Top research men in industry reason this way, frantic bidding by space and military contractors for scientists and engineers is creating a big shortage for industry.
This scarcity, along with the skyrocketing salaries it is provoking, is bringing almost a halt to the hitherto rapid growth of company-supported research.
This development hampers efforts to develop new products and processes for the civilian economy.
And it just goes on and on from there.
The American Economic Review said that the growth of military and space research and development, quote, has significantly retarded the growth of civilian R&D.
So this isn't just some libertarian obsession.
This is a very, very mainstream concern.
Yeah, absolutely.
And you know, there's something here, too, that you mentioned that is so important and should be easy enough for people to get their head around, too, at least in a way.
And that is the big round number, $1 trillion a year.
And that's Winslow Wheeler, Robert Higgs, William Hardtung, and Mandy Smithberger, and a great many of our critics on defense spending.
Real experts.
And you've got to throw in the VA and the energy departments, care and feeding of all the H-bombs, and all of the rest of that.
But that ends up $1 trillion a year.
Let me ask you, I mean, what really does that mean?
How much is a trillion dollars really, Tom?
Well, I mean, what does the U.S. government spend every year?
I mean, it's usually right.
Yeah.
So it's already that chunk right there.
And so when people say we're going to engage in a lot of cutting of spending, you know, at this point, how can you not laugh at Republicans who say that?
Almost the only area you can do it in at this point would, I mean, yeah, you've got like the Department of Education.
That's not going to save you that much money.
It's got to be the military, because, as you say, a trillion dollars is so much money.
And obviously there is a little fat to trim when you're spending as much as every other country combined.
And given what's happening in the United States right now and how much division there is among our own people, I think that that has done more than all the Tom Wood Show episodes in the world to convey to people whether there's democracy in nowherestand is really not that urgent to us.
It really isn't.
It's much more urgent that we have a good standard of living for our own people and we have reconciliation among our own people, for heaven's sake, whatever's going on in Hong Kong or whatever.
I mean, I wish all these people well, but for heaven's sake, we have finite resources and abilities to solve problems.
And so the first problems have to be our own.
Yeah, you know, I was talking with a guy the other day and I can't vouch for these numbers.
You know, I don't know if you've ever seen statistics like this, Tom, but it sounded somewhat reasonable to me.
I don't know.
And I'm not saying that it would solve the problem or that I would support it or anything like that.
But just in the scheme of things, he said, you know, you could buy every homeless person in America a house, all of them for about 40 billion dollars.
Which is essentially nothing.
This is a huge problem in our society.
Again, I'm not saying that would be the solution to the problem or something.
Yeah, no, I get 40 billion dollars.
That's nothing compared to what they waste killing people.
You could spend that killing Arabs in a week.
Right, right.
I think that is that's one of the things that.
And that's why people are socialist, too.
They're going, oh, yeah, you have money all day for killing Arabs, but you can't help my neighbors.
That is exactly what I was going to say that they never when they when they need it, they find it somehow.
And I could totally understand the logic of a progressive saying, well, if you can find it that quickly for a destructive purpose, surely you can find the tiniest fraction of it for a good purpose.
And I mean, it's almost hard to fault that I get the logic there.
Yeah, and it's and I don't does that sound right to you, let's call it 100 billion or something.
It's still chump change in the scheme of things compared to the federal budget, really.
Again, not an argument for it, but just goes to show how mixed up the priorities are, you know?
Yeah, yeah.
And that I can get why they're frustrated with the Democratic Party, because they'll hem and haw about the military budget.
But by and large, they'll sign on.
Oh, hey, let's go ahead and mention yesterday the Democrats in the House of Representatives teamed up with Liz Cheney in order to pass a resolution to try to prevent Donald Trump from pulling troops out of Afghanistan.
Absolutely crazy.
I didn't know about that.
There's your Democrats.
That's what they mean by attack the right from the right.
It's a little bit different.
It's the Liz Cheney rule.
It's sort of the fun house version of what we're talking about.
Yes, it is.
She's crushed.
So, oh, what's the clock?
Oh, man, we got to go here.
Let me just ask you real quick to comment, if you could, on the F-22 and the F-35, because you have a great bit, especially on the F-22 in here and and just what a boondoggle this thing is.
Well, I'll just give just given that we're limited on time, give the general principle that's involved, which is you think if you have a boondoggle, well, it'll just naturally go away because, you know, if it doesn't work, how could they keep funding it?
But the trouble is what happens is at first they overpromise what the thing can do.
They underpromise how much it will cost.
Then when the opposite of those things happen, you can't just get rid of it because then they've spread out the funding for it to all kinds of congressional districts, particularly the districts of people who are committee heads.
And then they say, well, look, I got all these jobs and profits in my district.
I can't get rid of it.
So the spigot gets turned on and it can't get turned off even when the thing is a boondoggle, like in particular the F-35.
It still keeps getting funded.
And this is what one of the things Winslow Wheeler identified.
It is.
I mean, talk about an insane funhouse.
That's what that's what happens.
Yeah, absolutely.
All right.
I'm so sorry that we're out of time and got to go.
But great to talk to you again, Tom.
Thank you.
Thanks.
Military economy dot com to get this book for free.
Military economy dot com.
Thanks again, Tom.
Thanks, Scott.
All right, you guys.
And of course, Tom Woods website is for his show is Tom Woods dot com.
And also check out his books Nullification, Rollback and We Who Dared.
Oh, and Meltdown.
Oh, that was a good one from The Last Crash and We Who Dared Say No to War that he co-edited with Murray Polner, which is all great antiwar stuff through all American history that you guys are going to want to look at, too.
The Scott Horton Show, Antiwar Radio, can be heard on KPFK 90.7 FM in L.A.
APS Radio dot com, Antiwar dot com, Scott Horton dot org and Libertarian Institute dot org.
