For Antiwar.com and Chaos Radio 95.9 FM in Austin, Texas, I'm Scott Horton, and this is Antiwar Radio.
How did we get into this mess?
Well, everybody knows that war is good for the economy, right?
That's why those darn Republicans did this.
Or, in fact, I guess, depending on your point of view, that's why those wonderful Republicans did this.
They got us into this war so that they could keep the American economy strong.
That's what wars do.
Anthony Gregory's on the phone.
He's a scholar from the Independent Institute, the Future Freedom Foundation.
He writes regularly also for LewRockwell.com, Liberty Magazine, Strike the Root, and others.
And he's got a great article that's up on the Future Freedom Foundation website and also on LewRockwell.com about the myth of war prosperity.
What do you mean, the myth of war prosperity?
Anthony, isn't it the case that wars make us all rich and strong?
It is a myth.
My article, which was a book review of Robert Higgs, a scholar at the Independent Institute, his book Depression, War, and Cold War, which really looks at whether or not these myths of wartime prosperity hold true, if you look at the details.
Robert Higgs is the guy that wrote Crisis and Leviathan, right?
Yes.
This is in a sense a sequel to that academic work in that Crisis and Leviathan ends its focus where Depression, War, and Cold War starts up.
But the themes are very similar.
And now the basic theme of Crisis and Leviathan is that every time something really bad happens and the government moves to intervene and solve the problem, they always grow, and I guess he calls it the ratchet effect, right?
That even if you shrink the government back down a little bit after the crisis has abated, that it never shrinks back to the way it was before.
And so after each crisis and each crisis, we end up building this gigantic, now $3 trillion a year government, right?
Right.
I guess one very crude way to put it is Higgs' book Crisis and Leviathan is about how when there's a disaster, government grows.
And Depression, War, and Cold War, again very generally speaking, is about how when the government grows, it's a disaster.
Yeah, the people suffer.
Yeah, well, you know, this myth is important because the interesting thing is you don't hear it quite as much as you did for a while, but I know when the, I remember when the Iraq War was building up and when the war just started, you know, it seems like, what was it, 40 or 50 years ago, there was a lot of, you know, there were cynics on the left who were saying, you know, this is a war for oil and empire, where the U.S. is kind of like a classic empire that goes around and just seizes resources to help its subjects.
And a lot of warmongers kind of accepted that argument too, at least implicitly, that we need this war.
I mean, I've heard some of them say, yeah, well, maybe this war is about oil.
So what?
We need oil.
Right, hey, my good friend Nick says that.
My good friend Nick says, hey, we need that oil and I don't care about those people.
Well, sure, and of course it's horribly immoral to go steal someone's oil if that's what you actually think you're endorsing, but that's not really what happened.
The price of oil has, of course, gone up because this is just, you know, as the demand for oil has increased with China and just everybody constantly wanting oil, this has, if anything, disrupted the supply.
But the interesting thing is, the war that people point to most is, of course, World War II.
Yeah, see, that's what I was going to say.
I mean, you could probably just blame this disaster on George Bush and his incompetence, because we all know, Anthony, we've all learned from the time we were little kids, that World War II saved America from the Great Depression.
Well, yeah, that's true.
I remember the first time I heard that, and the thing is, when you're a young kid and you learn things that sound really counterintuitive, like a bunch of destruction and war is what made us economically healthy, you're not supposed to question it.
You're just supposed to assume, oh yeah, that makes sense, because it doesn't make sense.
And of course, a lot of mainstream economics is very counterintuitive, I'd say.
It's all about the theory of World War II as well as the theory of the New Deal, and indeed, the implicit theory behind U.S. policy since has been this kind of Keynesian or quasi-Keynesian view that if the government spends money, even if it's on something that's not in itself productive, not necessarily, it's good for the economy because it puts money in the hands of people who then spend it, and then basically the government can help the economy spend itself out of depression or spend itself into prosperity.
And really, it is counterintuitive, because what is war?
It's the production of a lot of munitions and hardware, which at its most productive just sits there and collects dust, and if it's actually used, it destroys property, and it kills lives and it consumes labor just to run the whole thing.
So if indeed it's true that World War II brought us out of the Depression, it would seem the lesson should be that the government should get us into wars or spend lots of money, lots of tax dollars on whatever it wants, because that's good for the economy.
But if that were the answer, then there'd be no economic trouble by now.
We just tax and spend and tax and spend.
And what Robert Higgs has done more clearly than anyone else, to my knowledge, is he actually has gone in and looked at the economic indicators that supposedly show a huge improvement in the economy during the war, and he's shown that actually it's all very deceptive.
They say that unemployment dropped during World War II.
Well, that's true because the official unemployment numbers, they include those that were drafted, and during the war, about 10 million Americans were drafted into the armed forces.
And they were employed, but in terms of their actual well-being, which you'd think economics should be most concerned with, if people are actually doing well, not just whether a bunch of numbers going back and forth between financial institutions say they're doing well.
Well, these people who were employed weren't actually necessarily better off.
They're fighting in a war.
They were drafted.
Many of them were blown to pieces.
Oh, sure.
Hundreds of thousands of them were.
And also, on top of that 10 million who were conscripted, that is enslaved and forced to go fight, there were also another, I believe, 6 million.
It was 16 million Americans that were in the military during World War II in one form or another, right?
Yes, and about almost two-thirds of them were conscripts.
Wow, look how great my unemployment rate is doing.
It's just plummeted.
Sure.
I mean, if you enslave people, then you can increase your employment rate.
And then, you know, there were a lot of other economic indicators that mainstream economists use show that there was a lot more activity during the war, money spent on production.
In terms of personal consumption of the goods that you need to have a healthy or to have some mild luxury in your life, these were all hindered by the war because there was a shortage of some goods.
Some consumer goods were just not available.
It's really deceptive.
What actually helped, in a sense, you know, according to Higgs' research and in terms of the well-being of people and the fluidity of the market and how much investors felt that they could invest in the economy to produce something other than for the government, the Depression didn't really end until the end of the war.
And it was at the end of the war when they got rid of a lot of controls that they had imposed upon the economy during the war that had even gone further than the New Deal, much further.
They had retracted these controls and some of the New Deal controls, and the economy was in many senses freer after World War II than it had been any time since FDR's New Deal had begun, though in many ways, of course, according to the ratchet effect which played out here, the U.S. was never as free in its economy than it was before the war, and also World War II gave us the military-industrial complex, this permanent relationship between the big defense contractors and the military, with these revolving doors between big business, military business, and the warfare state.
Okay, now let me stop you before we get into the Cold War and Franklin Roosevelt's legacy as the creator of the American military-industrial complex.
I think we need to go back and confront a couple of things about the Great Depression here, Anthony, particularly, basically what you're arguing here is that the New Deal constricted the economy and made the Great Depression worse, and then the war basically clamped down on the economy even more than that, and it was when some of this was finally undone after the war that the prosperity finally came, and yet I think myself and my entire audience have always learned in history class that the free market's excesses went wild and proved the dangers of laissez-faire capitalism, and they blew it and caused the Great Depression, and that the New Deal did a pretty good job of saving us from the Great Depression, but it was World War II that really brought us out of it.
So, you know, it can only be one or the other here, Anthony.
Make your case.
Well, I'd say that's a false choice, but no, the traditional account, the conventional account, is almost the reverse of the truth now.
The Great Depression was an international phenomenon that is hard to blame on any single factor, but in the American context, the stock market crash and the further fall of the economy were a result of government intervention in the economy.
There's a great book, a classic book, America's Great Depression by Murray Rothbard, where he goes into the policies of the Herbert Hoover administration and also explains the business cycle and central banking.
The Federal Reserve was inflating the money supply in the 20s and creating this artificial boom, and the stock market crash, to make a long story short, was the economic chickens coming back to roost, and there were also other policies in the 20s that aggravated the problem once the stock market hit.
There were very high protectionist tariffs under the Republican administrations of the 20s.
Despite what people say, despite the conventional wisdom, Herbert Hoover was not a small government guy.
Compared to FDR, he was, but, you know, hindsight and all that.
Hoover rapidly expanded the government, intervened the economy to try to reverse the Depression.
It didn't work.
FDR came to power and threw economic freedom out the window and enacted all of these code authorities and tried kind of corporatizing the economy, modeling it after Mussolini in some ways, and that's an actual fact.
Some of his policies were copied from the corporate fascism of Mussolini, but the point is that none of this really worked.
As Higgs shows, he has this phenomenon he calls regime uncertainty, where investors just didn't feel comfortable throughout the 30s because of FDR's policies frightened them into thinking if they invested, there'd be no stability in the market economy.
Who knows what FDR is going to do tomorrow?
So that eventually caused actual negative net levels of investment in the 30s, and that's horrible for the economy.
But what's funny is people always credit FDR for saving us from the Depression, but why did the Depression last so long?
It's not like there was this horrible Depression that lasted only a year or two, then FDR came in and stopped it.
This horrifying Depression, the worst extended Depression in American history, certainly, lasted well over a decade in actual terms, and arguably more than that, because it went into a decade and a half through the war.
So the question shouldn't be how'd FDR get us out of the Depression, because he clearly didn't.
And most mainstream economists and historians will agree that the New Deal didn't really work.
They'll try to say that it might have been worse without it, but it's hard to see how, because all of the previous huge crashes and recessions and depressions in American history, none were like the Great Depression and how long they lasted.
So I'd say the case is very strong that it was the New Deal that made the Depression last as long as it did, and it wasn't until World War II ended that America got a semblance of the freedom and the economy back, and thus the prosperity of early 1930s levels of investment, of a normal economy that was more centered on consumer goods than weapons of mass killing and uniforms and everything that, of course, is going to be produced at wartime.
I believe during World War II, about 40% of the economy was tied up in war.
And of course, that's a huge chunk that makes the current war look small, and of course we're fortunate to the extent that the current wars are smaller than these huge total wars, where they created a garrison economy for all people.
So that's the truth.
The war didn't save us from the Depression, and it's very destructive to assume that war is good for the economy.
And since World War II has always been the supposed great example of this, if you tackle World War II, the warmongers lose the economic arguments for war in general, pretty much, because the other wars, it's much murkier to try to argue, because they don't have these huge statistics of economic growth.
I'm Scott Horton.
This is Anti-War Radio.
I'm talking with Anthony Gregory from the Future Freedom Foundation and the Independent Institute.
We're going to play this very important message for you and come right back with more Anthony Gregory on Anti-War Radio, 95.9 FM in Austin, Texas.
All right, everybody, welcome back to Anti-War Radio.
I'm your host, Scott Horton.
I'm talking on the phone with my pal Anthony Gregory from the Independent Institute, and I think he just did a pretty good job of tackling the myth that somehow Franklin Roosevelt and his fascist New Deal program, or worse, his fascist war against the fascists, are what saved us from the Great Depression.
So now, Anthony, I want to get into this military-industrial complex, Franklin Roosevelt's legacy, everybody's favorite president, my least favorite.
What happened?
At the end of World War II, we got some prosperity, and yet seems like a great portion of this new wealth was diverted into preparing for the next war.
Well, yes, again, we see the ratchet effect here, the Higgsian ratchet effect in that there was a huge level of liberalization after World War II, and yet America was never the commercial republic it was before then, even in the Progressive Era where it was kind of going around the world and beating up on small countries, basically, because after World War II, it was kind of this permanent warfare state, and FDR created it, and Truman was the first president who, after a huge, gigantic war, instead of, you know, really retracting the warfare state and trying to bring it back to the peace, as close to the peacetime levels as it would go, he really kind of just went off and started a whole new crusade against the allies of the US during World War II.
So all of a sudden, Stalin and the Communists, who the US was fighting side by side with, justified basically a permanent war against communism.
It wasn't, you know, so permanent, but it sure lasted decades.
And it was this time that the defense contractors and these big businesses, which FDR had courted for the purposes of war, he had alienated them, especially in the mid-30s, with some of his New Deal policies, but he had to get them kind of more on board with the administration if he was going to fight this huge war.
So starting in the late 30s, he was more chummy with big business, or the military and industrial complex aspects of big business, the merchants of death, as some of the more astute hippie types might call them.
But then by the Cold War, a lot of these relationships had been forged, and Higgs, in his book, his research has shown the extent to which these corporations, these defense contractors, have sort of become adjuncts of the state, or their relationship with the state is so intimate, the amount that they make off of their profit levels tend to be high compared to the rest of the economy, and they're guaranteed these huge contracts, and Higgs shows how the Congress will vote, and even as the Cold War ended and wound down, the Congress would vote to fund programs and weapons systems that the military didn't even ask for, because there's just this inertia, this institutional inertia, to keep building this stuff, to keep employing and expanding the military industrial complex, and this really is an outgrowth of Franklin Roosevelt, who the mainstream left reveres this man, but he's the reason we have a military industrial complex, and if you're not going to blame it all on him, you've got to blame it on Truman.
So these liberal heroes are responsible for this.
This is why I think a lot of the left will say the World War II got us out of the Depression, because they want us to revere Roosevelt, and a lot of conservatives will agree, because they want us to revere war.
So we have an uphill battle here, because when a perceived supposed liberal, big-spending, domestic Leviathan-type paragon of big government home like Franklin Roosevelt, the hero of so much of the left, is also a hero of the right, because he gave us the current warfare state, the Empire, I mean, in a lot of ways he did.
So there's kind of an incentive on behalf of all of these interests, and the business interests, the military business interests, of course the military itself, the bureaucracy.
I mean, the U.S. warfare state is gigantic.
Tigges has shown in other work that if you look at the defense budget, the actual defense budget's probably about twice that amount if you add up all of the ways they hide defense spending in other departments, Department of Energy, interest on past, expenditures on the military and war, and of course the wars, they don't even count in the budget, which is the really aggravating thing.
Yeah, and we're really at the point here with this military-industrial complex, I think, where the tail's just wagging the dog.
You've got even major oil interest representatives like James Baker and Zbigniew Brzezinski saying, hey, chill out, let's not bomb any more countries around there, and apparently Lockheed says go, and they get to choose.
I don't know if you saw that great article by Richard Cummings in Playboy magazine about how at Lockheed it was simply a business decision.
I can completely just see this happening at the boardroom table.
First of all, selling aircraft for civil aviation, yeah, there's some good money in that, but I forget which plane it was, but they had developed this plane, put all this money into developing this plane that nobody wanted, and they decided we can't take these kind of risks with this much money, so here's what we're going to do.
From now on, we're going to target the U.S. government as our number one customer.
We're going to sell as many products as we can to them instead.
And then it was simply one logical step from there to say, well, still, how do we know which products to develop?
Well, here's what we need to do.
We need to control the policy.
We need to be the ones who decide which words are going to be fought and how they're going to be fought, and then that way we'll know which kinds of planes to invest in.
And these people think they're good Americans.
They're just doing their job every day.
They have no idea how ridiculous that is compared to the way the American system is supposed to work.
Yeah, it's true, and the real shame here is that both on left and right, these huge defense contractors are seen as kind of the model of American enterprise, a free enterprise, but they work on the exact opposite principle of an actual free market economic transaction or happening.
I mean, these companies aren't selling stuff to consumers at a price that the consumers agree to such that they find the free market argument is that in a market, resources are devoted to their efficient use.
People, since they have their own money and there's the price system and they're all trying to kind of outbid each other, there is a certain equilibrium, not an exact stability, of course, but none of this stuff applies with the military industrial complex because it's just selling it to politicians.
These politicians aren't spending their own money on these bombs, and even the warmongers aren't.
The cost is socialized to taxpayers, so the government can just print more money or raise taxes to pay for any weapons systems to the point of actually destroying the economy and this is very, very bad for the economy.
It's very draining on our resources.
Every dollar spent on war is that many resources unavailable for private consumption.
And I'm really glad you said that because I like to go to these anti-war protests and I always see the sign that says less money for war, more money for jobs here, and the implication, of course, is that the government should still get all this money.
It's just they ought to spend it differently.
Yeah, and the thing is, if the gun was to my head and I had to choose, I'd rather have the government spending money on getting people to dig holes just like FDR did in parts of the New Deal, just makeshift work than have them spend the money killing people and making the world hate us and making us less safe from terrorism and all of these other horrible effects from the war.
But it is true that it's funny because the left has some point here that the money should be spent on jobs, but the way to do it isn't to have the government fund it because you have a lot of the similar problems.
It's not quite as egregious or morally troubling when it's the domestic government doing this, but it's still not an actual market working and people are going to waste lots of money.
There's going to be corruption.
So it's really interesting to see them make this argument because either they're almost there or they really just want to build up a huge socialist state at home.
Yeah, one or the other of those two.
And you correctly say that this isn't free market capitalism and that point has really got to be driven home to the right and to the left who both mistakenly think so, as you say.
This is, at best, you could call it, you know, the nicest term for it would be crony capitalism or corporate welfare, but really it's, I guess in peacetime you'd call it neo-mercantilism, you know, like the Virginia Company and the British East India Company, you know, sanctioned by the British Crown and that kind of thing back in the day where the state and the corporation are one.
But in wartime, I'm not sure what to call it but fascism, Anthony.
Yeah, well, you know, it's sad because, you know, the left uses the term fascist to pretty much describe anything they don't like.
If you want to cut some government program, you're a fascist, whereas, you know, the fascists weren't really known for cutting government.
No, they weren't.
But no, that's exactly what it is.
When you socialize the cause, but you privatize the profits and the benefits, that's not private enterprise or free enterprise.
It is fascism.
It's economic fascism.
In crisis in leviathan, Higgs, I believe he calls the system of the U.S. economy not just in its warfare state implications, but certainly that would be a huge part of it, participatory fascism in that you can vote.
It's not the same kind of fascism that we attribute to the dictatorships of Mussolini or Hitler, but the economics of it are very fascistic.
It's not free enterprise at all if the buyer doesn't get to decide what he buys, but it's just being taxed, you know?
Yeah, well, and taxed now to the tune of $3 trillion a year.
That's the budget.
As you say, that doesn't include the war.
That's the federal budget for 2007, Anthony, $3 trillion.
It was, I believe, Bill Clinton had the first $1 trillion budget in 1998 or 99.
No, I think actually by the end of Clinton the budget was reaching $2 trillion.
Okay, yeah, maybe it was earlier in the Clinton years.
Yeah, Bush did have increased the federal government by probably over 50%, which is really great for all the people who thought he was going to give a smaller government and a humble foreign policy.
Yeah, well, I read in the New York Times that he's a libertarian, and I guess that increasing the size of the government by half again is a sign of that, huh?
Oh, well, you're talking about the book review of Brian Doherty's book on the libertarian movement where I believe that's what you're talking about, where the New York Times said that Bush's reconstruction of Iraq, he's doing it on free market principle, which is this is just an obscenity.
There's nothing free market about it.
I mean, if I rob you on the street, I say give me all your money, and then I go and use the money to buy something that I want, maybe the fact that I bought something I want is an expression of my freedom, but it wasn't rightful freedom because I stole the money from you.
Yeah, and in this case, you stole the money from me in order to buy a bigger gun so that you could go rob somebody else.
Well, yeah.
All right, now, hey, David J. Thoreau, your boss at the Independent Institute, I get this little monthly Independent Institute newsletter thing in my mailbox, and if anybody heard the show yesterday, you may have heard me trying to go from memory as to the biggest expenditures in this $3 trillion budget, and I said it was $700 something for the war, then it was $500 something billion for Social Security, and then in third place was $400 billion just to pay the annual interest on the national debt, and then when I said that out loud on the air yesterday, I said, no, wait a minute, that can't be right.
Four hundred billion?
No, no, no.
It must have been 40.
I'm sorry.
I don't know.
I'll have to go back and double check.
Well, I did go back and double check.
I was right the first time.
Four hundred and five billion dollars will be spent by the U.S. Congress this year just to service the interest on the national debt.
Yeah, and you know, when you think about it in terms of the average American, including, you know, every child and every elderly person who doesn't work, this comes down to over a thousand dollars per American per year just to pay interest on the debts run up by the politician.
Yeah, the debt that is now approaching $9 trillion.
It's staggering, and a lot of it is the warfare state, and furthermore, the more the government wages war like this, the more everyone's guard is down when they spend a lot of money on other stuff that people don't want, or other stuff that some people might want, but it makes no sense to spend it.
You know, you've got this huge prescription drug program that Bush passed to kind of win over votes and also to help the pharmaceutical companies that are allied to the Republicans, but even a lot of the welfare status on the left didn't want this, and the Democrats largely voted against it.
Of course, they voted against it because it was a Republican measure, but the point is something like this probably wouldn't have been passed if people weren't so distracted by this war on Islamofascism, as they call it.
No, you're absolutely right.
I mean, I think there are so many scandals in the Bush administration.
If you and I were to sit down and try to list them all, we'd probably miss a good third of them just because the other two-thirds are so humongous that the other stuff gets buried, and you're right.
It's stuff that if all the war crimes and torture and kidnapping and murder and aggressive warfare wasn't distracting us, the kinds of things that we would be extremely opposed to in and of themselves, and they're getting away with it.
One really good example of this, it's not a financial scandal, but I'd certainly say it's a scandal against American liberty and the Bill of Rights, is that I think it was the same day that they passed the Military Commissions Act last year where they suspended habeas corpus for the first time legislatively since under Lincoln when Congress eventually rubber-stamped his suspension.
I mean, the first time we've suspended it officially since Abraham Lincoln.
This is some really scary stuff.
The same day, I think, they also passed the Appropriations Act that included the new changes to Posse Comitatus and Bush's new power to kind of go over the heads of all the governors in calling up the National Guard and basically to use the military for civilian law enforcement.
That's such a scary thing.
That's such a troubling thing.
But since it was the same, if on the same day the government turns the clock back to before 1215 and the Magna Carta, you know, this is a huge strike against civil liberty and the rule of law, they also do something else that in itself would be horrifying if it was done alone.
No, it's really true.
It's why I like to say that I hated the Clinton administration.
It was scandalous, it was immoral, it was wasteful and destructive and busy-bodying and it was murderous and all of these horrible things.
I mean, killing innocent people in other countries and in our country and ratcheting up the drug war.
Clinton administration was terrible, but it's almost as though the worst thing Clinton would have done any given year, Bush is doing every week or every day.
Yeah, and you know what's funny about that?
When you bring up the John Warner Appropriations Act and the Military Commissions Act, you're right, the Military Commissions Act got all the press at the time because it was so much even worse that we didn't notice this overriding of the authority of the state governors in our supposed federal system.
But on top of that, when the story finally broke and anybody began to pay attention to it, it was the same week as the Scooter Libby verdict.
And so it still didn't get any media, it may not have anyway, but again, a scandal of earth-shaking proportions buried by other scandals of earth-shaking proportions.
And now I just wanted to say real quick here to wrap up, Anthony, it's been a while since I've read George Orwell, but in 1984, if I remember right, when O'Brien, the torturer, is still pretending to be Winston Smith's friend and he gives them the book about, here's how we do it, he's reading to his girlfriend, Julia, and it's all about how the wars are made, first of all, to instill loyalty to the state, and second of all, to take all the excess wealth and dump it into the ocean where the people can't get to it.
They're talking about building the floating fortress, right, like our modern aircraft carriers.
So they can take all the wealth away from the people who might otherwise spend it, educating themselves, bettering themselves, maybe buying property and making themselves rich and becoming the competition to the people who have the power now.
And I believe that this is not only just one of the main reasons to oppose the warfare state, but I think it's one of the underlying reasons for having this warfare state in the first place, to keep that money away from us.
Well, you know, I forgot who said it first, but there's this great libertarian insight that during war the state doesn't protect its subjects so much as it calls upon the subjects to come to the defense of the state.
And war is the biggest boon for a state up until the point that it's defeated in a war, at which point it's either embarrassed or in many cases destroyed.
But for the U.S. government, which is frighteningly Orwellian more and more, you just look at the way they name bills and amendments now, and the way they have euphemisms for everything, collateral damage and renditioning, which means sending someone to Syria or Egypt to be tortured horribly.
It's true that the war...
I wouldn't go so far to say that they want us to be poor.
I think they want us to keep producing enough and be happy enough so they can be even richer and happier.
So that's why in America they won't totally socialize the economy and destroy completely, because then the parasite will lose its hope.
Yeah, and I think that's why there's so much opposition to Bush and the establishment now.
They're afraid that he's killing their golden goose.
Yeah, and they want to be around to be parasites on the host until the end of time.
And Bush is sucking too much blood out of it.
All right, everybody, this has been Anthony Gregory from the Independent Institute in Oakland, California.
He also writes for the Future Freedom Foundation, LouRockwell.com, Liberty Magazine, Strike the Root, and a few others I probably left off.
Thanks for coming on the show today, Anthony.
Oh, you're welcome.
It's been fun.
Talk to you soon.
All right, everybody, this is Antiwar Radio on Radio Chaos 95.9 FM in Austin, Texas.
