Paul Krugman: Wars don't pay but politicians wage them anyway

Syndicated columnistAugust 24, 2014 

Paul Krugman

Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed Page and continues as Professor of Economics and International Affairs at Princeton University. Krugman received his B.A. from Yale University in 1974 and his Ph.D. from MIT in 1977. He has taught at Yale, MIT and Stanford. At MIT he became the Ford International Professor of Economics. Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes. His professional reputation rests largely on work in international trade and finance; he is one of the founders of the "new trade theory," a major rethinking of the theory of international trade. In recognition of that work, in 1991 the American Economic Association awarded him its John Bates Clark medal, a prize given every two years to "that economist under forty who is adjudged to have made a significant contribution to economic knowledge." Krugman's current academic research is focused on economic and currency crises. At the same time, Krugman has written extensively for a broader public audience. Some of his recent articles on economic issues, originally published in Foreign Affairs, Harvard Business Review, Scientific American and other journals, are reprinted in Pop Internationalism and The Accidental Theorist. Krugman was born on February 28, 1953.

FRED CONRAD — The New York Times

A century has passed since the start of World War I, which many people at the time declared was "the war to end all wars."

Unfortunately, wars just kept happening. And with the headlines from Ukraine getting scarier by the day, this seems like a good time to ask why.

Once upon a time wars were fought for fun and profit; when Rome overran Asia Minor or Spain conquered Peru, it was all about the gold and silver. And that kind of thing still happens. In influential research sponsored by the World Bank, the Oxford economist Paul Collier has shown that the best predictor of civil war, which is all too common in poor countries, is the availability of lootable resources like diamonds. Whatever other reasons rebels cite for their actions seem to be mainly after-the-fact rationalizations. War in the preindustrial world was and still is more like a contest among crime families over who gets to control the rackets than a fight over principles.

If you're a modern, wealthy nation, however, war — even easy, victorious war — doesn't pay. And this has been true for a long time.

In his famous 1910 book "The Great Illusion," the British journalist Norman Angell argued that "military power is socially and economically futile." As he pointed out, in an interdependent world (which already existed in the age of steamships, railroads, and the telegraph), war would necessarily inflict severe economic harm even on the victor. Furthermore, it's very hard to extract golden eggs from sophisticated economies without killing the goose in the process.

We might add that modern war is very, very expensive. For example, by any estimate the eventual costs (including things like veterans' care) of the Iraq War will end up being well over $1 trillion, that is, many times Iraq's entire GDP.

So the thesis of "The Great Illusion" was right: Modern nations can't enrich themselves by waging war. Yet wars keep happening. Why?

One answer is that leaders may not understand the arithmetic. Angell, by the way, often gets a bum rap from people who think that he was predicting an end to war. Actually, the purpose of his book was to debunk atavistic notions of wealth through conquest, which were still widespread in his time. And delusions of easy winnings still happen. It's only a guess, but it seems likely that Vladimir Putin thought that he could overthrow Ukraine's government, or at least seize a large chunk of its territory, on the cheap - a bit of deniable aid to the rebels - and it would fall into his lap.

For that matter, remember when the Bush administration predicted overthrowing Saddam Hussein and installing a new government would cost only $50 billion or $60 billion?

The larger problem, however, is that governments all too often gain politically from war, even if the war in question makes no sense in terms of national interests.

Recently Justin Fox of the Harvard Business Review suggested that the roots of the Ukraine crisis may lie in the faltering performance of the Russian economy. As he noted, Putin's hold on power partly reflects a long run of rapid economic growth. But Russian growth has been sputtering — and you could argue that the Putin regime needed a distraction.

Similar arguments have been made about other wars that seem senseless, like Argentina's invasion of the Falkland Islands in 1982, which is often attributed to the then-ruling junta's desire to distract the public from an economic debacle. (To be fair, some scholars are highly critical of this claim.)

And the fact is that nations almost always rally around their leaders in times of war, no matter how foolish the war or how awful the leaders. Argentina's junta briefly became extremely popular during the Falklands War. For a time, the "war on terror" took President George W. Bush's approval to dizzying heights, and Iraq probably won him the 2004 election. True to form, Putin's approval ratings have soared since the Ukraine crisis began.

It's an oversimplification to say that the confrontation in Ukraine is all about shoring up an authoritarian regime that is stumbling on other fronts. But there's surely some truth to that story — and that raises scary prospects for the future.

Most immediately, we have to worry about escalation in Ukraine. All-out war would be hugely against Russia's interests — but Putin may feel that letting the rebellion collapse would be an unacceptable loss of face.

And if authoritarian regimes without deep legitimacy are tempted to rattle sabers when they can no longer deliver good performance, think about the incentives China's rulers will face if and when that nation's economic miracle comes to an end — something many economists believe will happen soon.

Starting a war is a very bad idea. But it keeps happening anyway.

THE NEW YORK TIMES

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