"The government deficit is the difference between the amount of money the government spends and the amount it has the nerve to collect." ~ Sam Ewing
Neoconomics in One Lesson
Imagine, if you will, the following scenario:
I get together with a gang of my best and most loyal buddies, and armed with sledgehammers, we break into your house and smash up all your furniture. Why we do this is insignificant. We believe we have an 'obligation'--nay, even a 'right'--for a wide variety of reasons to our own personal liking. We like what we do and we do what we like, so we just do it.
After smashing up all your furniture--your coffee table, kitchen table, reclining chair and television set, as well as having broken the handles of our own sledgehammers in the process--we then promise to replace all those private possessions of yours that we destroyed. So naturally, we go back to our hometown--some 20 or 30 miles away--and we go out into the street with our guns and start mugging people in order to pay for those replacements.
The first person we encounter is a young woman with a child in tow. She's just noticed that the kid has a hole in one of his shoes, and so she's on her way to the local shoe store to buy junior a new pair.
'Your money or your life!' we yell at her, sticking our guns in her face. Too frightened by our threat of force to refuse us, she complies and empties the contents of her purse into my hands (after all, I'm the ringleader, so naturally I'm the one who gets to handle all the money). We go on our way down the street, and she and her child turn back and go home rather than go to the shoe store. Now that my gang and I have mugged her, she's simply out the money she was going to use to buy her son that new pair of shoes. She settles on the idea that perhaps she can patch the hole and her little boy can 'get by.' Thus, the shoe store is out that much money as they are now less one sale they otherwise would have made had my gang and I not mugged the unsuspecting young woman, and the manufacturer of the shoes is less one sale they otherwise would have made to the shoe store, and so it goes, like a ripple effect throughout the community.
And so my gang and I go on, mugging anyone and everyone we come across. We meet a professional mover who's on his way to the auto parts store to buy those spare parts he needs for his truck. 'Hold on there, buddy! Your money or your life!' Scared witless, he complies. Now that he's out the money he was going to spend on those parts, he rationalizes that maybe he can instead 'jerry-rig' something together and 'make do.' The auto parts store is now less one sale they otherwise would have made had the guy not been mugged by me and my gang--they're out that much money.
After a long and hard day of robbing just about everyone we meet on the street, my gang and I decide that surely we must now have enough loot to go purchase a new reclining chair, tables and television set to replace those we smashed to bits upon breaking into your house. Oh, and new sledgehammers, too, we can't forget those! If you recall, we broke the handles of the ones we had while diligently busting up your furniture.
My gang and I decide that as for the sledgehammers, it's probably wisest to not merely replace them, but to replace them several times over, because after all, who knows how many more houses we'll have to break into and smash up? Am I right or am I right? My gang concurs wholeheartedly. Telling me exactly what I want to hear, they advise that as far as sledgehammer policy goes, it's best to err on the side of caution--we can never have too many sledgehammers. (And just because some of them have friends and relatives who are executives and shareholders of sledgehammer manufacturers is no reason for me to doubt the integrity of their advice. I happen to know for a fact that folks in the sledgehammer business are perfectly good, respectable people. After all, my own family has been in the sledgehammer industry for generations.)
But before we actually set about to purchase the new furniture, my gang and I realize that we're going to need to skim some of the plunder off the top for ourselves. We've gone through a hell of a lot of trouble to mug all those people--it's exhausting! Besides, we need food, clothing and shelter just like anybody else, right? Of course, there's no market process by which to determine how much such industrious thieves should pay themselves, so we just take as much as we want.
We head on over to the local furniture retailer en masse. Upon reviewing their prices, we panic. We realize we don't have nearly enough money left over to replace all of your furniture. What are we going to do now? Ah, we remember we have our guns with us!
'We have only so much money!' we exclaim, waving our guns around. 'Either accept our prices or face the consequences!' Frightened by our sudden show of force, they comply. Having been forced to sell to us at below market prices, however, they are now out that much money. The managers of the furniture store subsequently agree that they must now raise the overall prices of their goods to compensate for the loss.
And voila! You have your new tables, reclining chair and television set. Of course, you merely have replacements of the things you already had in the first place, before my gang and I destroyed them, but hey, stop your moaning and groaning! You should be thanking us! You should get on your knees and kiss our feet for our great humanitarian efforts!
And so the cycle goes, over and over and over again. We bust into people's houses in other towns, smash up their furniture, and then return to our hometown and mug all of our neighbors to replace the destroyed property. After a while, though, I start to notice that something's up in our community. It seems that people just don't have as much money as they used to. We've mugged everyone so much that they have virtually nothing left. Businesses everywhere are shutting down, such as the professional mover. He raised the price of his services several times to compensate for the money he lost to us in multiple muggings, and now virtually no one will contract him. He already laid off several of his employees, such as that young woman with the little boy, who worked for him keeping his books, but even these cuts in labor costs aren't enough to keep him afloat--he just can't afford to stay in business anymore.
Well this is no good, I think to myself. My gang and I need money to steal, but everyone's practically broke! There are no more fruits left to plunder. I huddle with my crew and see if we can't come up with a plan. After several hours of batting around ideas, this really, really smart guy--a regular brainiac, this dude--suddenly blurts out, 'I've got it!'
He tells us his idea and it's so simple, but at the same time so ingenious, so utterly brilliant, I can't believe I didn't come up with it myself a long time ago! If I had, we wouldn't have had to mug nearly as many people as we did. Would've saved us a hell of a lot of hard work, and being the gang leader that I am, I'm all about avoiding hard work whenever possible.
This is the plan: We simply pay the furniture and sledgehammer people in paper IOUs!!! Isn't that incredible?! I make a mental note of the guy who came up with this idea--Johnny Keynes is his name--to make sure he gets some kind of fancy-sounding award some day so the whole world knows what a sharp mind he has.
Johnny says that as long as we keep the furniture and sledgehammer people flooded with enough of these paper IOUs in exchange for their products, everything will be as good as gold! They in turn will use these IOUs to buy things for themselves, and pretty soon prosperity shall return to the community and we foxes shall have chickens to pluck once again. I tell the gang to go get a good Xerox machine and get to work at once.
After using these paper IOUs for some time, it seems that nobody can get enough of them. (We experience a little trouble with some smart-alecs who try to make their own paper IOUs to buy stuff with, but I send out my biggest muscle to take care of these crooks . . . Imagine the nerve!) It increasingly takes more and more of these little pieces of paper to buy things as time goes on, and the furniture people seem to double their prices every time we go buy from them. I take note that some of them are starting to drive some pretty fancy cars--Mercedes-Benzes and the like. Their head sales guy starts wearing some pretty fancy threads. Johnny advises me to just keep making more and more of the little paper notes and just pay the furniture folks (and our sledgehammer friends, of course) as much as they want. Now we're breaking into more houses and busting up more furniture than we ever have before!
But eventually our community's newfound prosperity is disappearing and businesses are shutting down once again. The problem is that the prices of everything in paper IOUs have soared so high that no one can afford anything anymore. Many have borrowed these notes from banks that some of my buddies have set up, but they've borrowed so much that they're simply drowning in debt. People are out of work and barely able to get by. Everything is falling apart. Folks start getting angry and hostile, claiming that 'greedy businessmen' had been 'exploiting' them to make unfairly huge profits. The merchants say these claims make absolutely no sense in light of the fact that they're in the same boat as everyone else, but people are simply too angry to listen to reason. In short, they place the blame for all of their troubles on everyone but the one group of individuals who are actually responsible--me and my gang.
Ah, the fools! They don't even understand what's happened to them! Man, they are easily confused. They just don't get it. My gang and I have just mugged them all over again--many times over! Ha, ha, ha---SUCKERS!!!
Er, I mean--ahem--We will definitely get to the bottom of this! This is an outrage! My gang and I will personally see to it that all those greedy, selfish so-and-so's who had the nerve--nay, the unmitigated gall--to reap big profits by offering goods and services to individual consumers are punished accordingly! Why, who ever heard of such chicanery? This is unheard of! Punish the merchants! Force them to share the fruits of their labors with everyone else equally--in the name of social justice and fair play, we demand it!
While I readily admit that this hypothetical scenario of mine may not have included every detail, I submit that it more or less sums up the economic principles of war, with myself and my gang representing government and its assorted hangers-on, lackeys and sycophants. The purpose of my illustration is to demonstrate how, contrary to a long-standing popular misconception I've heard repeated in this country many times over the years, war never increases the net wealth of a nation, as there is never any net economic creation. There is only net economic destruction. (I confess that there is one particularly huge, gaping hole in my analogy, which I'll get to later.)
This essential truth should not be surprising, as it is the very nature of government to suck up the resources of the population it purports to 'govern,' in times of relative peace as well as in times of war. There is absolutely no way that government can 'create' anything--it can only take away or destroy. That's all it can do. If it is 'providing' something to someone, it is doing so only by the means of taking something away from someone else. To forcibly transfer something from one individual's hands to another's is, obviously, not really 'providing,' it's stealing, and indeed it is destroying, as the plundered individual gets absolutely nothing in exchange. The State is a parasitic leech.
Now grant this leech vast armies, great battleships and stealth warplanes, and it is no longer merely a leech, but a great, massive beast whose economically destructive nature is multiplied a thousand fold. Tanks and other armored vehicles, jeeps, missiles--they cost the taxpayer many, many hundreds of millions of dollars, and in a time of war much of this hardware ends up destroyed in the process of destroying other people's property. Taxpayers could all just flush that money down their toilets rather than hand it over to Uncle Sam for the purpose of so-called 'national defense,' and it'd have just the same net effect as far as they're concerned. The only individuals who do reap some financial rewards from this perverse system are those who are in any way involved in making the tanks, jeeps, missiles and other machinery of war, as well as those contracted by the government to reconstruct the ruined and destroyed property. They need only to please one customer, the U.S. Federal Megastate, which has no compunctions about continuously robbing its captive subjects by means of taxation and inflation--until the very marrow is sucked off their bones--in order to keep the arms merchants and other assorted lackeys flush with cash and credit. This is ultimately a transfer of wealth, which is also to say that it is a destruction of wealth, not a creation of wealth.
By using the word 'neoconomics' in the title of this piece, it may appear that I'm implying that the current Bush-Cheney neoconservative war cabal in Washington invented this whole corporate warfare/welfare state scam, but that would be an inaccurate claim to make. The model was established many, many years ago.
In his book The Real Lincoln, Thomas J. DiLorenzo assimilates for us the oft-neglected historical record of the true origins of the U.S. government's 'Civil' War Against Southern Independence. Contrary to the popular and utterly false myth that the war was fought to free slaves, it was actually fought to keep the Southern states within the American Union against their will. The reason they wanted to secede in the first place was that the U.S. Congress had passed the Morrill Tariff Act, which effectively doubled the average tariff rate. The largely agrarian Southern states had already been paying the vast bulk of tariffs due to its dependence on foreign trade, and thus they were supplying the mass of overall Federal tax revenues. They saw very little in exchange since most of that revenue was being directed to politically-connected Northern industrialists to carry out 'internal improvements' in the Northern states. In his first inaugural address, Lincoln essentially threatened the use of military force against any state that did not comply with the greatly increased rate of taxation.
Hence, the South's understandable desire to depart the increasingly criminal and belligerent Union , but Lincoln simply was not about to let all that tax revenue slip through Uncle Sam's fingers.
During the course of the war, Union forces looted and destroyed Southerners' private property at will and outright reduced many of their cities and towns to heaps of ash. During the subsequent 'Reconstruction' period, Republican Party hacks descended upon the shell-shocked Southrons and maneuvered themselves into political power so that they could fleece them with high taxes and plunder their private property with shady 'land distribution' schemes and many other forms of legalized robbery by which the many were forced to subsidize an elite clique of politically-connected business interests and various flunkies.
Before the dust of the war had barely settled, General U.S. Grant directed General William T. Sherman--who had so efficiently reduced the Tennessee Valley to a vast wasteland on behalf of Uncle Sam--to turn his prodigious homicidal talents to the task of executing ethnic genocide against the Plains Indians in order to make way for taxpayer-subsidized transcontinental railroads. By 1890, what few Plains Indians were still alive could only be found on the concentration camps that so many euphemistically refer to as 'reservations.' Interestingly, Sherman had been a bank president before the war and he had invested much of his bank's money in a railroad, and then persuaded his brother in the U.S. Senate to support government subsidies for it.
This corporate warfare/welfare state model has been the means by which the few have plundered the many ever since. It is clear that the Bushian neocons stand atop the shoulders of giants past. Unlike the great mass of average Americans, they have studied this tried-and-true formula very closely, and so far they are doing quite well for themselves, as recent events highlight.
In addition to Vice President Dick Cheney's old buddies at Halliburton getting non-competitive government contracts for construction projects in Iraq , I believe that one of the other benefits for those connected to this Big Oil administration has been the spike in oil prices. It would be quite reasonable to conclude that these recent price increases are a direct result of the Iraq War, as economics professor Christopher Westley pointed out in a recent piece he wrote for Mises.org. 'There is less oil leaving Iraq today than under Saddam,' asserts Westley. Consequently, oil prices have risen in accordance with the law of supply and demand. (If you read Westley's article, take special note of his quoting Bush moaning to neocon court historian David Frum about what he considers to be the negative consequences of 'cheap energy,' as Frum himself wrote in his Bush-kissing tome The Right Man.)
Now, consider that the U.S. Congress has recently agreed to open up a parcel of the Arctic National Wildlife Refuge (ANWR) for the exclusive use of U.S. oil interests (those with the right political connections, that is), and what do you have? It would appear that the Bushites in the Federal government may quite possibly be attempting to erect a protectionist system in favor of the U.S. oil industry. Bush himself frequently gripes about U.S. dependence on foreign energy, and considering his historic connections to domestic oil producers, it's easy to see why he'd be so unhappy with this state of affairs. If they can keep one or more foreign oil-producing countries in a continual state of chaos--and war is, of course, the ultimate chaos--then the price of foreign oil will remain relatively high.
As oil prices remain relatively elevated, I have a strong hunch that the Bush administration and their shills in the media will continue beating the drum against America 's horrible, ghastly 'dependence' on foreign-produced oil in their continuing efforts to create a popular demand for strictly domestic sources of energy. (As I write this, a visit to ANWR's official web site will inform you that OPEC's net oil exports are projected to increase this year by 42% from 2003, yielding them projected net profits of $345 billion in 2005. Further, the magical psychics at ANWR declare that 'Developing these [oil-drilling] resources [in ANWR] is expected to create over 750,000 new jobs for Americans. It's time to stop lining the pockets of OPEC nations, sending American dollars and American jobs overseas for oil we can produce at home.' If that's not protectionist propaganda for the domestic oil industry, what is?)
Once politically chosen domestic oil companies are pumping crude out of the land recently handed over to them by Uncle Sam, the American consumer will be at their mercy. The Republicans of the Civil War era would no doubt be proud to see their contemporary political descendants carry on this grand tradition of 'mercantilism,' or what can be best described as 'corporatist socialism.' (While it's true that oil drilling in ANWR is still anything but guaranteed, it's quite reasonable to project that, given the developing pattern of events, the domestic oil lobby will get what it wants sooner or later. Meanwhile, the U.S. government has recently rattled its saber at yet another oil-rich nation, Iran, which according to this oil industry journal 'is the second largest oil producer globally with approximately 9% of the world's oil.')
If you simply review the historical record and compare it with current events, you can see the pattern: Cliques of unscrupulous individuals manipulating the natural force and violence of government to fatten their pockets at the expense of everyone else. But the key is to pay attention, and to think, to actually use the brain you were born with. Every generation seems to fall for the same old lies packaged in red, white and blue; the same old tired propaganda and phony, saccharine nationalist sentiments used to cover up the highway robbery taking place right in front of their eyes, indeed, with their very consent. If you are one of the relative few who dare to even question any of the Official Myths of the State, heaven help you.
The one really big hole in my hypothetical sketch analogizing the economics of war was that my gang and I didn't kill anyone. We know that in real wars, our government murders many thousands of human beings. Many thousands more are not only physically scarred for life, but psychologically, too, as they strain to erase the memories of dead children and their neighbors' bloodied, mutilated bodies from their psyches. The mothers and fathers of dead soldiers are forever caught in a cycle of grief and sadness over having to bury their children, when they'd always believed that it would be their children who would bury them. The loss of human life is the one loss that simply cannot be measured in economic terms. There is no yardstick by which to measure the net loss of thousands of worlds that have been annihilated along with the senseless slaughter of each human being.
How much creativity have we lost? What great new technological innovations will never come to fruition? What life-changing scientific achievements or medical breakthroughs will go forever unrealized? What grand works of art and magnificent architecture will go forever uncreated? We'll never know.
Since it is becoming clearer and clearer as time goes on that the American people simply will not exercise their full intellectual capacity to keep the growth of destructive, centralized government power in check, as Thomas Jefferson had hoped they would, we can still take comfort in the fact that such a system will eventually destroy itself. What we are discussing here, after all, is Empire, that evil state of affairs by which a few self-anointed, politically-empowered elites enslave the many and send countless thousands to kill and die in endless wars that, one way or another, result in fatter pockets and greater material resources for those elites, whose moral scruples are so skewed and so perverse that one has to wonder if they are even of the human race.
History teaches us time and again that Empires never last . . . never. The Romans, the British, the Russians and many others have taught humanity over the years that the imperial arrangement of society eventually collapses under its own weight--the American Empire will prove no different. Its insatiable consumption of human lives and private wealth, with its costly, draining bureaucracy, will some day be its own ruin. Hopefully, we could then return to the vision originally articulated by our Founding Fathers--that of a commercial republic of free individuals making our lives better by way of only those enterprises that are peaceful and productive.
Would that day come very, very soon.