When there is war, private sector laborers’ earnings are coercively taken by federal taxation and then distributed throughout the military industrial complex. This influx of tax dollars allows weapon manufacturers to expand their operations, increasing war profits. The tax dollars allow war contractors to make bigger donations to campaign funds. The taxes fund public-work programs for the manufacture of weapons. The tax dollars allow military contractors to hire lobbyists and support politicians who will promote the non-American ideals of military interventionism and enhancing the surveillance and police state upon the U.S. homeland and her citizenry.
Yes, the economics of war brings short-term prosperity to the state and the state’s privileged war beneficiaries, but for the masses of Americans, the Americans who must obtain their wealth not through coercive taxation and confiscation, but through production and the voluntary exchange of goods and services, this economy of war has led to an economy of peril.
War leads to capital decumulation. When the state takes scarce capital out of the private sector to produce weapons, weapons which ultimately will be consumed upon unfortunate souls or stockpiled until they are recycled, no longer will the entrepreneur be able to use that capital in his businesses for the benefit of the consumer. Real capital is scarce. War demands oil, war demands steel, war demands labor, war demands resources, and as these resources are being used by the state, economic law forces resource prices to rise due to the smaller supply now available for private-sector use. From war capital becomes scarce, business operation costs increase, consumers pay higher prices, and private sector production decreases.
War leads to currency debasement. The government finances its war deficits by inflating the money supply. As war debt becomes insurmountable, the government begins to monetize the debt. The Federal Reserve creates the new money so the federal government can pay its war bills, but as the new currency begins to circulate, prices adjust upward and the consumer suffers the ill effects of this inflationary tax. As government increases the money supply, a larger supply of fiat dollars is chasing the same supply of goods, resulting in higher prices, causing the inevitable decline in an individual’s purchasing power.
After World War I, free market economist Ludwig Von Mises stated, War prosperity is like the prosperity that an earthquake or plague brings. The earthquake means good business for construction workers, and cholera improves the business of physicians, pharmacists, and undertakers; but no one has for that reason yet sought to celebrate earthquakes or cholera as stimulators of the productive forces in the general interest.
When there’s prosperity there’s peace, when there’s war there’s peril.