The Cost of War: Who Profits from It?

By Jamin Casciato

Since time immemorial, humans have raged against one another for various reasons. To this day, people groups involved in such disputes consider themselves to be justified in their use of force against others and, of course, the gods (or even God) are always on their side. We often hear the horror stories of those ravaged by war and the various indiscretions of other nations undertaken in times of conflict, but we are typically looking through a foggy window as opposed to a polished mirror. Why do we not see in ourselves the same evil we see in others? The mere fact that we can see it in others should cause us to consider whether we are guilty of the same, for we recognize it for a reason.

In opposition to what some have claimed, war is economically detrimental to a society. It only appears to be economically beneficial for a short period of time. In the short run, it puts people to work and huddles them together under the nationalistic banner of animosity toward others, constructing an illusory unity. In the long run, however, it unnecessarily raises the price level, plunges a nation into debt, trains people for specific manufacturing occupations that will (hopefully) become obsolete, and wastes resources that could be used constructively as opposed to destructively. Further, the thrust of war results in the formation of capital infrastructure that is generally only useful for military purposes and, naturally, encourages the continued use of such resources that have already resulted in sunk costs, thus providing yet more incentive for future conflict and warmongering.

One of the most highly venerated gods of Roman culture was Mars, the god of war. When looking at Roman culture in hindsight, we see that the Empire was consumed by war, violence, and general brutality. We also see that Rome overextended itself militarily, undertook excessive taxation of the general populace, and debased its currency, allowing the Empire to stretch itself beyond sustainable levels. Likewise, the collapse of the Soviet Union speaks to the dangers of increasing levels of national debt and extravagant military spending (as well as central planning and its corresponding erosion of personal agency). A few of the most common reasons for the historical collapse of economies and empires are unsustainable levels of national debt, debasement of currency (which leads to widespread inflation), and destruction spending. I refer to military spending as destruction spending, for it is both capital-destructive and agency-disruptive.

In the violent soap opera of war, capital is destroyed, which leads to deeper poverty for the common person in the country where the war occurs. If I work in a factory, and the factory is destroyed during a bombing campaign, I no longer have a job in the factory. Further, other capital, infrastructural, and natural resources (machinery, communications systems, hospitals, roads, bridges, forests, etc.) are compromised, leaving those in the nation “hosting” the conflict without the ability to work, communicate, trade, transport, and travel effectively, if at all. This thoroughly impedes a community’s ability to provide for itself, and can set an economy back quite some time. Further, war is agency-disruptive in that it diminishes the personal agency of those who live in war-torn areas where resources upon which they depend are located. If I rely on farmland for my livelihood, and the land with which I previously worked has been degraded by chemical warfare, I am no longer able to work for myself, and probably will be forced to rent myself to someone else in wage labor, as the resources I previously employed have been compromised.

Domestically, tax receipts that could be used to fund services that benefit the general populace are drained by the war effort, resulting in lower standards of living for the common person at home as well. Further, the increased spending on “defense” promotes inflationary pressures, driving up prices so that it is more difficult for the common person to survive and flourish. And the cycle continues, for the higher price level renders those with limited bargaining power (who cannot demand higher wages to match inflation) relatively poorer and poorer, thus sustaining a renewed socioeconomic underclass for the war machine.

A militaristic social fabric is maintained by poverty, for a poor economy yields a rich climate for war. When people are desperate and cannot find gainful employment, military enlistment becomes increasingly favorable as an occupational option. Is it possible that there are some who desire that the poor remain poor (or at least lacking in viable occupational opportunities) in order to recruit more (human) parts for a war machine that is supported by industries in which they have sizable financial interests? Greater access to education and sustainable, constructive work diminishes the size of the potential military population of a given society.

The statistics speak to our priorities as a nation. In 2015, the United States spent 16% of its federal budget on defense (20% in 2011), compared with 10% on safety net programs (13% in 2011), 2% on transportation infrastructure (3% in 2011), and 3% on education (2% in 2011). What kind of society spends more money rendering people in other nations poor and incapacitated than it does on its own poor and incapacitated? And if we are spending five-to-ten times the amount on the military that we are spending on education, in which direction is the general populace going to sway? People often go into the military when they cannot afford formal education, or as a means to afford it. Is there a reason we spend considerably more on the military than we do on education?

One can imagine what could be done with the funds being used for militaristic purposes. In 2011, the United States spent approximately $718 billion on defense and international security assistance (excluding benefits for veterans), allocating more funds to its military than the next thirteen nations combined.[1] As of 2012, 15% of Americans (nearly 47 million people) were living in poverty. It has been estimated that $175 billion would be necessary to bring every person in the United States up to the poverty line.[2] This same number is that referenced as the estimated total cost to end “extreme poverty” throughout the world.[3] The United States, which claims to be actively engaged in the struggle to end global poverty, has, over the last decade, consistently spent three-to-four times as much on its military as is necessary to put an end to extreme poverty for every human being on Earth. The situation becomes even less tolerable when one considers that the military budget is being used for many activities that actually increase poverty.

Economically speaking, war is poor policy for the vast majority of a nation’s inhabitants, regardless of where the war is fought. It is, however, a handsome business for industrialists, moneylenders, and those who control financial capital in certain industries, not least of which is the “defense” industry. Who is framing the conversation over our national security? Is it possible that those who stand to benefit from war are the ones claiming its necessity? It is important to note that war is remarkably lucrative for the industrialists and moneylenders who profit from war. Poor people kill other poor people with soon-to-be-poor people’s money, and the oligarchs of the victorious nation plunder the resources of the vanquished. Generally speaking, warfare can be summarized as poor people killing other poor people for the benefit of wealthy people. War is big business, and big business requires large loans with attached interest payments. We might consider more judiciously the incentives involved. If my personal wealth is dependent upon the manufacture of weapons, do I want peace? Defense contractors, oil companies, and financiers prosper from a perpetual state of war, for more war means higher profits for those with financial interests in the industries that manufacture weapons, provide the resource that fuels the modern industrial infrastructure, and provide loans at interest to fund the war effort. War benefits those who lend money, manufacture arms, and rebuild destroyed capital infrastructure. For certain influential corporate interests, peace is simply not profitable.

And who funds wars anyway? Is it possible that, at times, the same financial institution is funding both sides of a conflict? And what kind of political power do the principals of these corporations wield? The average citizen is certainly not devoting considerable sums of money to election campaigns. So, who is? When it comes to the ruthless pursuit of profits for the sake of pleasing shareholders (who are generally unaware of the activities of the enterprises they support), corporations will undertake the ventures that generate the highest profits. As it is the business of banks to earn profit through interest garnered on loans, it naturally follows that banks want to lend as much money as possible, just as a business manufacturing any kind of product wants to sell the most products possible.[4] Banks make a lot of money by making loans, and wars generate incredibly large loans.

And what of the national debt, which is the accumulated debt the government amasses on behalf of its citizens (also financed, one way or another, by its citizens)? It is constantly accumulating, as it is never paid off, for just the interest alone is sufficiently burdensome. In 2015, payments on the national debt of the United States cost taxpayers $223 billion in interest alone.[5] This expenditure amounted to approximately 6% of the federal budget, which is more than the government spent on education and transportation infrastructure combined.

The issue with this kind of deficit spending is that at least the interest must be repaid every year in order for a nation’s currency to remain economically viable. This means the state must find increasingly inventive ways of taxing the populace and curtailing funds directed toward the common good and those most in need. We are selling future generations into debt servitude. As long as the national debt (a large part of which can be attributed to military spending) continues to accumulate, we can expect increasingly lower standards of living for the general populace in decades to come.[6]

In reality, war is terribly disadvantageous to the vast majority of people. It is, however, beneficial for the state and the interested industrialists, as it maintains the state’s control over the populace, as well as the profit margins of the corporations who romance it. Therefore, it is in the interest of both parties for the war to go on…forever. This is why the war is typically waged against some sort of phantom—some disembodied, nebulous foe who can never truly be defeated, for he takes refuge in our very minds. It is truly a smooth enterprise: citizens and soldiers absorb the costs of war (economically, socially, and psychologically), while the state and its corporate darlings reap the profits. Why not do this forever?

How can this possibly end? For one thing, perpetual war requires a climate of perpetual fear. Are we willing to reclaim our minds and choose not to be manipulated by propaganda and dominated by fear? The hope is that war becomes less profitable for those who fight, whether because they have more career opportunities outside the military or simply because social pressure makes it unpopular. If people refuse to fight, imperialism becomes a more difficult task for the state. We know, of course, that those making the decision to wage war would not be willing to fight these wars themselves. Therefore, the war machine rusts to rot if those currently carrying out the violence cease to do so. If the cycle is to be broken, it must begin with those actively engaged in warfare. Without the consent of the consigned, militarism and its numerous negative repercussions cannot continue to prevail.

Peace is good policy, both socially and economically. It promotes sustainable industry, constructive work, and the use of our shared resources for purposes that benefit the common good. The pursuit of peace is the path to persistent prosperity.

Jamin Casciato has spent years studying sustainable development throughout the non-industrialized world. He has taught economics in Mexico and Iraq, where he traveled extensively among the indigenous communities of the regions, studying local social traditions, music, and traditional medicine. He has also spent time among the nomadic communities of northern India and Egypt, and has done development research in Central America, Africa, and East Asia. He studied economics at the University of Pennsylvania.

[Photo Credit: Jim]

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[1] Plumer, Brad. “America's Staggering Defense Budget, in Charts.” The Washington Post, January 7, 2013. Accessed July 14, 2016. https://www.washingtonpost.com/news/wonk/wp/2013/01/07/everything-chuck-hagel-needs-to-know-about-the-defense-budget-in-charts/.

[2] Bruenig, Matt. “How Much Money Would It Take to Eliminate U.S. Poverty?” Demos, September 23, 2013. Accessed July 14, 2016. http://www.demos.org/blog/9/23/13/how-much-money-would-it-take-eliminate-us-poverty.

[3] The idea of “ending poverty” through strictly monetary (quantitatively oriented) means betrays a misunderstanding of the nature of poverty, as well as the systematically enforced hindrances and concomitant factors (such as violence) that keep people impoverished. The numbers utilized for such estimations are, however, instructive for the sake of comparison in the current discussion.

[4] There are here considerations of the optimal output for a given business proposition (marginal revenue vs. marginal cost), which further supports the thrust toward economies of scale through corporate growth.

[5] “Policy Basics: Where Do Our Federal Tax Dollars Go?” Center on Budget and Policy Priorities, March 4, 2016. Accessed July 14, 2016. http://www.cbpp.org/research/federal-budget/policy-basics-where-do-our-federal-tax-dollars-go?fa=view&id=1258.

[6] Citizens often are not cognizant of deterioration in standards of living for two reasons. First of all, they do not recognize reductions in real income due to the relative value of money (as a result of inflation) and the illusion of rising incomes in absolute terms. Secondly, citizens often neglect to recognize the deterioration in the quality of the (public) products and services they use across generations due to the absence of economic control variables. In other words, later generations have little means of comparing the quality of the products and services they use (such as education) to those produced formerly, as they were not around to use them.