The Pitfalls of Peace

The Lack of Major Wars May Be Hurting Economic Growth

Tyler Cowen
The New York Times, JUNE 13, 2014

The continuing slowness of economic growth in high-income economies has prompted soul-searching among economists. They have looked to weak demand, rising inequality, Chinese competition, over-regulation, inadequate infrastructure and an exhaustion of new technological ideas as possible culprits.

An additional explanation of slow growth is now receiving attention, however. It is the persistence and expectation of peace.

The world just hasn’t had that much warfare lately, at least not by historical standards. Some of the recent headlines about Iraq or South Sudan make our world sound like a very bloody place, but today’s casualties pale in light of the tens of millions of people killed in the two world wars in the first half of the 20th century. Even the Vietnam War had many more deaths than any recent war involving an affluent country.

Counterintuitive though it may sound, the greater peacefulness of the world may make the attainment of higher rates of economic growth less urgent and thus less likely. This view does not claim that fighting wars improves economies, as of course the actual conflict brings death and destruction. The claim is also distinct from the Keynesian argument that preparing for war lifts government spending and puts people to work. Rather, the very possibility of war focuses the attention of governments on getting some basic decisions right — whether investing in science or simply liberalizing the economy. Such focus ends up improving a nation’s longer-run prospects.

It may seem repugnant to find a positive side to war in this regard, but a look at American history suggests we cannot dismiss the idea so easily. Fundamental innovations such as nuclear power, the computer and the modern aircraft were all pushed along by an American government eager to defeat the Axis powers or, later, to win the Cold War. The Internet was initially designed to help this country withstand a nuclear exchange, and Silicon Valley had its origins with military contracting, not today’s entrepreneurial social media start-ups. The Soviet launch of the Sputnik satellite spurred American interest in science and technology, to the benefit of later economic growth.

War brings an urgency that governments otherwise fail to summon. For instance, the Manhattan Project took six years to produce a working atomic bomb, starting from virtually nothing, and at its peak consumed 0.4 percent of American economic output. It is hard to imagine a comparably speedy and decisive achievement these days.

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Living in a largely peaceful world with 2 percent G.D.P. growth has some big advantages that you don’t get with 4 percent growth and many more war deaths. Economic stasis may not feel very impressive, but it’s something our ancestors never quite managed to pull off. The real questions are whether we can do any better, and whether the recent prevalence of peace is a mere temporary bubble just waiting to be burst.

Tyler Cowen is a professor of economics at George Mason University.

SOURCE: http://www.nytimes.com/2014/06/14/upshot/the-lack-of-major-wars-may-be-hurting-economic-growth.html?_r=0

Tired Of Inequality? One Economist Says It'll Only Get Worse

by NPR STAFF
September 12, 2013 3:05 AM

Economist Tyler Cowen has some advice for what to do about America's income inequality: Get used to it. In his latest book, Average Is Over, Cowen lays out his prediction for where the U.S. economy is heading, like it or not:

"I think we'll see a thinning out of the middle class," he tells NPR's Steve Inskeep. "We'll see a lot of individuals rising up to much greater wealth. And we'll also see more individuals clustering in a kind of lower-middle class existence."

It's a radical change from the America of 40 or 50 years ago. Cowen believes the wealthy will become more numerous, and even more powerful. The elderly will hold on to their benefits ... the young, not so much. Millions of people who might have expected a middle class existence may have to aspire to something else.

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Some people, he predicts, may just have to find a new definition of happiness that costs less money. Cowen says this widening is the result of a shifting economy. Computers will play a larger role and people who can work with computers can make a lot. He also predicts that everyone will be ruthlessly graded — every slice of their lives, monitored, tracked and recorded.

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http://www.npr.org/2013/09/12/221425582/tired-of-inequality-one-economist-says-itll-only-get-worse

Shock Jock

By TYLER COWEN | October 3, 2007
Book Review
The Shock Doctrine: The Rise of Disaster Capitalism
by Naomi Klein

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Ms. Klein's rhetoric is ridiculous. For instance, she attaches import to the fact that the word "tank" appears in the label "think tank." In her book, free market advocates are tarred with the brush of torture, because free market advocates often support unpopular policies, and torture also often supports unpopular policies. Clearly, by her tactic of freewheeling association, free market advocates must support torture. Often Ms. Klein's proffered connections are so impressionistic and so reliant on a smarmy wink to the knowing that it is impossible to present them, much less critique them, in the short space of a book review.

Rarely are the simplest facts, many of which complicate Ms. Klein's presentation, given their proper due. First, the reach of government has been growing in virtually every developed nation in the world, including in America, and it hardly seems that a far-reaching free market conspiracy controls much of anything in the wealthy nations. Second, Friedman and most other free market economists have consistently called for limits on state power, including the power to torture. Third, the reach of government has been shrinking in India and China, to the indisputable benefit of billions. Fourth, it is the New Deal — the greatest restriction on capitalism in 20th century America and presumably beloved by Ms. Klein — that was imposed in a time of crisis. Fifth, many of the crises of the 20th century resulted from anti-capitalistic policies, rather than from capitalism: China was falling apart because of the murderous and tyrannical policies of Chairman Mao, which then led to bottom-up demands for capitalistic reforms; New Zealand and Chile abandoned socialistic policies for freer markets because the former weren't working well and induced economic crises.

But the reader will search in vain for an intelligent discussion of any of these points. What the reader will find is a series of fabricated claims, such as the suggestion that Margaret Thatcher created the Falkland Islands crisis to crush the unions and foist unfettered capitalism upon an unwilling British public.

The simplest response to Ms. Klein's polemic is to invoke old school conservatism. This approach, most prominently represented by classical liberal Friedrich Hayek, rejected the idea of throwing out or revising all social institutions at once. Indeed the long history of conservative thought stands behind moderation in most matters of social and economic policy. That tradition does advise a scaling down of free market ambitions, no matter how good they may sound in theory, and is probably our best hedge against disasters of our own making. Such a simple — indeed sensible — point would not have produced a best-selling screed, however. And so we return to charging Friedman as an enabler of torture. The clash between democratic preferences and policy prescriptions is, if anything, a problem for Ms. Klein herself. Ms. Klein's previous book, "No Logo" (2000), called for rebellion against advertising and multinational corporations, two institutions which have proved remarkably popular with ordinary democratic citizens. Starbucks is ubiquitous because of pressure from the bottom, not because of a top-down decision to force capitalism upon the suffering workers in a time of crisis.

If nothing else, Ms. Klein's book provides an interesting litmus test as to who is willing to condemn its shoddy reasoning. In the New York Times, Nobel Laureate Joseph Stiglitz defended the book: "Klein is not an academic and cannot be judged as one." So nonacademics get a pass on sloppy thinking, false "facts," and emotional appeals? In making economic claims, Ms. Klein demands to be judged by economists' standards — or at the very least, standards of simple truth or falsehood. Mr. Stiglitz continued: "There are many places in her book where she oversimplifies. But Friedman and the other shock therapists were also guilty of oversimplification." Have we come to citing the failures of one point of view to excuse the mistakes of another?

With "The Shock Doctrine," Ms. Klein has become the kind of brand she lamented in "No Logo." Brands offer a simplification of image and presentation, rather than stressing the complexity, the details, and the inevitable trade-offs of a particular product. Recently, Ms. Klein told the Financial Times, "I stopped talking about (the campaign against brands) about two weeks after ‘No Logo' was published." She admitted that brands were never her real target, rather they were a convenient means of attacking the capitalist system more generally. In the same interview, Ms. Klein also tellingly remarked, "I believe people believe their own bulls---. Ideology can be a great enabler for greed."

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http://www.nysun.com/arts/shock-jock/63867/