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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

Costs and Benefits of the War on Terrorism



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Tim Fernholz and Jim Tankersley make a number of reasonable points in their article on “the cost of Bin Laden.” This passage, however, struck me as questionable:

All of that has not given us, at least not yet, anything close to the social or economic advancements produced by the battles against America’s costliest past enemies. Defeating the Confederate army brought the end of slavery and a wave of standardization—in railroad gauges and shoe sizes, for example—that paved the way for a truly national economy.

Given that at least 600,000 Americans died during the civil war, and that there are easy-to-imagine counterfactual scenarios in which we avoided war yet North America nevertheless embraced standardization in railroad gauges and in which economic and external diplomatic pressure forced the South to abandon enslavement, this doesn’t sound quite right. I think it is possible to believe both that the Civil War was worth fighting in some broader sense, given limited information and the exigencies of the time and the incalculable evils of enslavement, and that it was staggeringly expensive.

Vanquishing Adolf Hitler ended the Great Depression and ushered in a period of booming prosperity and hegemony. Even the massive military escalation that marked the Cold War standoff against Joseph Stalin and his Russian successors produced landmark technological breakthroughs that revolutionized the economy.

Was vanquishing Hitler the lowest cost way to achieve this outcome? If Alexander Field is right and the 1930s were the most “technologically progressive” decade of the last century, it seems safe to assume that the U.S. economy would have enjoyed a bonanza of productivity growth even if the Second World War hadn’t led to the deaths of tens of millions of, to put it coarsely, potential trading partners, particularly in central and eastern Europe.

As for the massive military escalation, it’s important to consider the counterfactual: Had defense expenditures not swelled during this era to levels that in some years reached 10 percent of GDP, it is possible that the United States would have had a lower tax burden on capital income, thus encouraging investment in our capital stock. A higher level of disposable income might have spurred the development of various consumer-friendly technologies. Who knows? Had we chosen to embrace public investment with those dollars, we might have built elaborate underground rail systems, or at the very least bridges that weren’t “fracture-critical,” and thus easier and more to the point less expensive to maintain.  

Note that elsewhere in the piece, the authors acknowledge the role of opportunity cost:

It’s similarly difficult to assess the opportunity cost of the post-9/11 wars—the kinds of productive investments of fiscal and human resources that we might have made had we not been focused on combating terrorism through counterinsurgency. Blomberg says that the response to the attacks has essentially wiped out the “peace dividend” that the United States began to reap when the Cold War ended. After a decade of buying fewer guns and more butter, we suddenly ramped up our gun spending again, with borrowed money.

Yet it should go without saying that past conflicts had staggering opportunity costs as well, e.g., the costs associated with the deaths of tens of thousands of Americans during the Vietnam era.

Perhaps the biggest economic silver lining from our bin Laden spending, if there is one, is the accelerated development of unmanned aircraft. That’s our $3 trillion windfall, so far: Predator drones. “We have spent a huge amount of money which has not had much effect on the strengthening of our military, and has had a very weak impact on our economy,” says Linda Bilmes, a lecturer at Harvard University’s John F. Kennedy School of Government who coauthored a book on the costs of the Iraq and Afghanistan wars with Nobel Prize-winning economist Joseph Stiglitz.

This is odd. I am actually quite happy to concede that all of this money was “a waste,” yet one could argue that the resulting expansion of public employment in the domestic security space, and the parallel increase in private security employment, was a good thing. One could also argue that increases in the size of the military helped integrate a large number of young people, particularly men, into the mainstream labor market by providing them with economically valuable noncognitive skills. I can’t say how much this is worth, but I have to assume that the number is higher than zero. I wouldn’t make this case, but of course I also believe that we should shed a large number of public sector jobs. 

If we believe, however, that maximizing the number of public employees isn’t our goal but rather that the public sector should aim to provide high-quality essential public services at the lowest possible cost, we’d have to change our assessment of the national security state pre-9/11 as well as post-9/11. Moreover, we’d have to face the very real possibility that we’ve wasted far more than $3 trillion on a number of domestic initiatives, e.g., the marked reduction in student-teacher ratios in our public schools over the last forty years, the monopoly provision of educational services in most jurisdictions, Medicare FFS, and off-balance-sheet credit guarantees. 

I’ll advance a few simple propositions: violence is bad and generally best avoided. All threats tend to provoke an overreaction, because the dangers of undersupplying security are generally considered greater than the dangers of oversupplying security, particularly in a competitive multiparty democracy. This has been true for a long time. 



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