War is good for… American business

by Rashmee

Posted on January 9, 2020



 

If you’ve ever wondered why the US continues to talk the language of war while claiming to want peace, here may be one answer. Axios’ Felix Salmon has a quick take on the bonus effect that decades of war have had on the US economy.

He starts by urging us to look beyond the short-term effect of war. So, never mind that US stocks are sold off at the prospect of war with Iran; or the record stock market highs when fears of war abate.

Mr Salmon says that over time, “war tends to be good — not bad — for American stocks.”

But then he offers a remarkable numbers read out:

  • The Dow rose 43 per cent during World War I, despite the destruction of much of Europe
  • It rose 50 per cent during World War II
  • Defense spending has accounted for more than 3 per cent of US economic activity in every year since World War II, making it a “consistent and predictable fiscal stimulus”
  • The 2020 US defense budget stands at $738 billion, or about 3.6 per cent of GDP. Mr Salmon points out “that’s roughly the same as the entire economy of Switzerland, or the $787 billion spent on the 2009 American Recovery and Reinvestment Act, aka the Obama economic stimulus bill”.

It is Mr Salmon’s conclusion though that is profoundly disturbing:

He points out that Iran doesn’t significantly matter to global trade and so “the only way that US companies can make money from Iran is by selling materiel for use in a war there. The bigger any war, the more money they can make”.

 


Rashmee has lived and worked in several countries in the past decade, including Afghanistan, India, Haiti, Tunisia, the UAE, US and UK

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