“Good War” Would Rescue the US Economy

American experts believe that a “good war” will help the US to avoid economic problems

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This article originally appeared at Svpressa, translated from Russian by Olga Seletskaia exclusively for SouthFront

A leading overseas economist made a statement that new armed conflicts needed to take the country out of crisis.

A victorious war or vigorous preparations for it would be the best means to rescue the US economy from the growing crisis. The former chairman of the Federal Reserve System (FRS ) Ben Bernanke said this, speaking at Brookings Institute (Brookings Institution) – the leading conservative US Center for the Study of Politics and Economics .

Military spendings increase aggregate demand in the economy, especially in a situation of high unemployment and recession. Of course, it is better to keep the military objectives apart from the short-term economic goals and objectives, but sometimes they are quite important , “- said the former head of the FRS.

According to him, one of the most obvious examples is the Second World War, “when the vast military orders literally dragged the US economy out of depression, and they had a huge effect on the increase in production, which lasted after the war as well.”

According to Bernanke, the reduction of military expenditures, starting in 2010, have a negative impact on the growth rate of US GDP.

“Today, military spendings does not constitute such a large share of GDP as before the Second World War or in the 1960s; and, the effects of their volume reduction are quite noticeable; in fact, the last few years they have been negative,” – said the former head of the American Regulator.

Bernanke especially emphasized that “one of the most important positive effects of military spending has been and remains a link between the military development and wider technological trends.”

This is one of the main sources of the US economic growth in the long run. We remain (due to war – “JV”) the technological leader in the world, this is one of the key elements of our strength as a nation, “- summed up Ben Bernanke.

In fact, the former head of the FRS openly states that only war can really boost the US economy and allow it to overcome the negative effects of the current crisis.

What wars did Ben Bernanke mean, that could return America to its economic position of uncontested leader?

Ben Bernanke is not just a big name in the world financial circles, whose opinion is valued by the US business community. He is an expert with a deep understanding of the geopolitical situation, – says Colonel-General Leonid Ivashov, a member of the Academy of Geopolitical Problems, former Head of the Main Department of International Military Cooperation in Russian Defence Minisitry in 1996-2001. – I believe, Bernanke, as director of the Federal Reserve, has studied thoroughly the impact of military spending on the growth of the US economy.

Speaking of the impact, we must keep in mind that the Americans transferred a significant portion of its manufacturing to Asia where labour and raw materials are cheap. But America keeps defense and space industries in its own territory. Hence, Bernanke is right twice: to boost the American economy in its current form, they desperately need huge military orders.

In addition, not only promotion of military economy is most effective. Let’s say you manufacture cars. But each of your sold cars is relatively inexpensive, and you saturate the market with them pretty quickly since car owners will be using the purchased cars for a few years and will not be buying new ones for a while.

The situation is fundamentally different in military industry. A cruise missile is worth at least a million dollars. It can be put into action from the combat aircraft shortly after it left military plant. Then the military plant receives a new order.

The capital, invested in the defense industry during the wars, is the most profitable. It multiplies jobs and accelerates the overall movement of finances in the country. All this has a very positive impact on GDP growth.

America became a great power thanks to large orders in the First and Second World Wars. America supplied the UK, Nazi Germany, the Soviet Union with lots of goods and products, and it made money on each of these countries. Plus, the war in Europe forced almost all European countries to move their deposits of gold reserves to a safe place – to the States. US put them to use which also helped to boost the US’ economic growth.

“SP” : – What wars is America benefiting from now?
First of all, it is the crisis in the Middle East, which is set up for next twenty years. The crisis is a blow on Europe, China and Asian countries, as they are main consumers of Middle East oil. In addition, from the US perspective, it is also a way to eliminate competitors in the oil market.

Europe is also working for the US military machine today. The present structure of NATO is arranged in such a way that the Europeans themselves, without the help of the Americans, can not fight. For example, a European armies do not have aircrafts with airborne survey, satellite reconnaissance and navigation. As a result, when any war starts, Europeans line up for American weapons.
By the way, to “stimulate” Europeans, the US demonizes Russia. And I must say, they are doing it quite successfully – Europeans are more willing to spend on the military these days.

But it is important to understand that military expenditures do not lead to the well-being of the entire American nation, but only certain companies and the political groups that are based on the military-industrial capital are the ones who benefit.

“SP” : – Why did Bernanke raise the issue of military stimulation of the economic growth?
The speech by the former head of the Federal Reserve is in line with the new US National Security Strategy, which was adopted in February this year. The document makes a bid for a unipolar world; Russia is named among the main threats, and the document announces the principle of defending American national interests anywhere in the world from a position of power. This means that US military spending in the near future will grow. I do not rule out that they will not only reach the previous record of 600 billion dollars a year, but they might also overcome this figure.

“SP”: – Where will all this lead to?
To a large World War II without the use of nuclear weapons. Or to a series of regional wars. Now they are unwinding inter-Korean crisis; there are no efforts to prevent the war in the Middle East, they are fueling Ukrainian crisis. And, of course, there is the possibility of a conflict between the US and China, or between Japan and China.

Situation in the Arctic is very alarming. In short, conflict can arise anywhere in the world, especially in a situation when the US economy is sliding into a recession. In my view, a series of conflicts is being prepared. And very soon all it will take the US is to bring only one match – and the world will explode.
Military-industrial complex is an effective engine of the great powers’ economies, – says Ivan Konovalov, the director of the Center for Strategic Conjucture. – Some projects, originally created for military, often are used in civil industries as well. It is also partially true for Russia. Our defense industry today generally supports the Russian economy.

Nevertheless, I disagree with Ben Bernanke’s parallels between the Second World War and the current wars, led by the Americans. The United States directly did not fight in the battlefields of the First and Second World Wars. They cleverly became active only at the end of both campaigns to make sure that they get the fruits of victory. Americans are good at this.

Of course, the US economy during the Second World War received a powerful impetus to the development. It benefited greatly from military orders and the enormous war credits. In addition, the Second World War allowed the US to destroy economically its main opponent back then – UK. Britain after the war was finally blown away in terms of the economy, it collapsed as an empire, and it irrevocably become a satellite of Washington.

“SP” : – Is it possible to regard the words of Bernanke as a call for a new campaign?

– Bernanke repeats the idea of the American establishment: for the economy to grow, we need a new good war. In fact, that’s what the US has been doing over last years – in Yugoslavia, Iraq and Libya. And they will continue to be doing the same.