Math

In another blog, someone wrote about the economics of the war. without getting into the politics of the whole thing, I will just stick to the math and economic theory.

first off, a war CAN boost the economy. It happened twice. After WWI, we had the roaring 20s. Then a massive crash in the 30s, only to be pulled out of it by massive public works projects and a build up for WWII. And during WWII, the USA went into production overtime. So many war materials were cranked out that nothing can be compared to it today. Shipyards were putting out entire Liberty Ships DAILY. Facotries were running 24/7. Steel was being produced as fast as it could be used.

After WWII, all these factories had the capital to re-tool, so when people came home there were plenty of factory jobs. And with all the jobs, people had money. And with money, people bought a lot of stuff made in American facotries. The system was in awesome shape.

But what about Vietnam? From an economic standpoint, it was a stupid thing to do. We were at full employment and full production. The job market did not need a war to create more jobs. Factories were perfectly happy making electric can openers and consumer vehicles. There were not many factories with unused capacity that could be used to make tanks.

So, the government had to compete with consumers for things like steel and aluminum. This caused the price of everything to go up. Fuel costs went up. Car prices went up. Electric can openers cost more. Everything cost more.

And things were more expensive for the military too. They had to compete with consumers for the same resources. So their tanks, guns, and bullets cost more.

So you are a factory manager. Your factory is doing just fine making electric motors for washing machines. Along comes Uncle Sam and he says "retool your plant to make tank parts". What do you say? Chances are you would say "I would rather not, unless you can make it worth my while". The plant would have to shut down to re-tool, re-train the entire workforce, and it would be months before the first tank part came off the line. Time is money, so that first tank part would cost A LOT. The government had to pay for the re-tooling, the re-training, AND the downtime that oculd have been used making washing machine motors. during WWII, there was no downtime to pay for because that factory was empty to begin with.

So now there is another war going on. As far as the economy is concerned, things look more like Vietnam than WWII. Yea, there was an economic downturn in 2000. And yes, Septmber 11 added to that slowdown. But in no way was the slowdown like the 1930s. The unemployment rate was not that high, inflation was rather low, and capital was cheap due to low interest rates. All in all, not a bad economic outlook.

So, according to economcs it was not a good time to start a war. I am ignoring the political implications of the war, I am trying to just stick to economics here.

Oh yea, I almost forgot to add in this little fact. American production has been outsourced. So even if the government starts to order tank parts, there is no gurantee that the parts will not be made in Mexico.

I would really like for Econo-Girl to chime in here. She can probably add to this posting. Hell, I might even be wrong here. I really do not know too much advanced economic theory to consider myself any kind of "expert".