Politics & Policy

Broken Window Gone Iraqi

Can Iraq benefit from a U.S. attack?

I’m heading off to some trade school in New Haven in a few hours, for a debate about something or other — which means I’ve got to write fast (and, long, alas).

So rather than dig through the newspaper for a fresh topic ripped from the headlines, as they say in the promos for Law and Order, let me grab a stale topic that I had to scoop from a moldering pile in my e-mail in-box, as we say here at NRO.

A couple weeks ago, I wrote what I still consider to be a pretty good column. It was titled, “War: What Is It Good For?” (I know, I know: It really should have had the “Unh!” from the original song in there — “War! Unh! What is it good for? Huh! Absolutely nothin’! Say it again!”)

As is always the case when I write anything about war, a bunch of people of varying degrees of zealotry sent me gobs of the same old clichéd diatribes about how I’m a chicken hawk, or how I should go “back” to Israel (I’ve never been there), or how I’m nothing more than a stooge for global oil interests.

But, amidst all of this silly drek there were a few e-mails from people demanding that I read Frederic Bastiat’s parable of the “broken window” (not to be confused with James Q. Wilson’s and George Kelling’s broken-window argument about crime).

Now I will admit that I hadn’t spent a lot of time reading the works of the 19th-century classical-liberal economist. And to be even more honest, when I say I hadn’t spent a lot of time, I really mean I hadn’t spent any time at all. I had heard of Bastiat mainly because Henry Hazlitt made the guy famous to new generations in his timeless book Economics in One Lesson. It was there that he made Bastiat’s tale of the broken window famous (and when I say “famous” I really mean “familiar to a tiny subset of policy geeks, professional economists, and all-around ideologues,” but that’s a quibble.) Anyway, Hazlitt, who really was brilliant, wrote that “the broken-window fallacy, under a hundred disguises, is the most persistent in the history of economics.”

So what is the broken-window fallacy? Well, it’s pretty simple actually. In the original parable (which you can find here), Bastiat tells the story of a youth who breaks a window. In response someone says, in effect, “Well that’s too bad but such accidents are good for industry because it will create work for the glass workers.” “What would become of the glaziers if no one ever broke a window?” asks an allegorical fool in Bastiat’s tale.

Bastiat then writes “Now, this formula of condolence contains a whole theory that it is a good idea for us to expose, flagrante delicto, in this very simple case, since it is exactly the same as that which, unfortunately, underlies most of our economic institutions.” I quote this passage for two reasons. One, because Bastiat is absolutely correct. Second, because we really don’t see the phrase “flagrante delicto” enough these days (unless it’s the name of some Latino gay fusion band I’m not aware of whose most popular song, no doubt, would be “the broken-window phallus.” But hey, that’s silly).

Regardless, if you don’t get it already or if you’ve lost track amidst my juvenile interjections (“Please, no Schoolhouse Rock songs,” my couch just yelled), think of it this way: A tailor’s window is smashed. The tailor cuts a check for a new window and we all cheer at the economic benefits that go to the window maker. What we cannot cheer are the unseen benefits that might have gone elsewhere if the tailor hadn’t been forced to pay for the new window. If that hadn’t happened, he might have bought his wife a new stove or he might have invested that money in a new store or, to be fair, he might have blown his whole stack on a three-day hooker and cocaine binge that would have ruined his marriage and left him screaming at the urinal. But the point remains the same: The money used to pay for a new window prevented that same money from generating other, perhaps more productive, economic activity. Destroying something shouldn’t be considered economically productive. If you don’t believe me, go home and burn your couch and see if you feel richer (“that’s not funny!” shrieked the couch).


The larger moral of the story is that economists and policymakers must take into account the unseen as well as the seen when spending money, especially other peoples’ money. A national program of needless ditch-digging may create jobs (seen benefits), but the money we take out of the economy will doubtlessly cost jobs elsewhere (the unseen). You can start to see why Bastiat and Hazlitt denounce this as such a simultaneously widespread and dumb way to look at economics.

After all, politicians have a tendency to care only about seen benefits because it is the seen benefits that accrue, like barnacles on a boat’s hull, real constituencies. An unnecessary military base creates real jobs for people who vote for a real congressman. If the base closes, the resources that went into the base will probably be redistributed to better purposes, but neither in the eyes of the people who lost their jobs nor in the eyes of the congressman who lost their votes. (The brilliant journalist Jonathan Rauch described this as one of the chief symptoms of what he dubbed “demosclerosis,” which he defined as “democratic government’s progressive loss of the ability to adapt.).


So what does any of this have to do with war? Well, according to some folks, wars are just huge versions of Bastiat’s broken window. Wars destroy things and the economic benefits accrued are either fallacious or acquired from the looting of other peoples’ property. For example, after the World Trade Center was destroyed a number of liberals, predictably including the Times’s Paul Krugman, argued that the war would be good for the economy. Walter Williams quickly teed off on Krugman, writing:

We know this has to be fishy just by asking: Would there have been even greater “economic good” had the terrorists succeeded in destroying buildings in Los Angeles, San Francisco, Chicago, Philadelphia, Boston and all other major cities? Of course, you and I know that is utter nonsense. Property destruction always lowers the wealth of a nation.

Now, I never explicitly made the argument in my “pro-war” column that war is good for the economy, in the Keynesian-Krugman sense. Still, I can see how people might think I was making that argument — and why they sent me all this stuff about Bastiat’s broken window. Regardless, my intended point, which most people got, is a simple one: Wars aren’t good for “absolutely nothing” as the song goes. They can bring with them benefits, in material terms (from expedited medical breakthroughs to space exploration) and in moral terms (the freeing of slaves, the end of the Holocaust, the liberating of Western Europe, etc). They can also bring nothing but death, cruelty, and horror.

And, this is very important (especially later in this column), I don’t think war is ever justified solely by any technological or economic benefit. That would make war the geopolitical equivalent of robbery (which, by the way, is precisely what Saddam’s invasion of Kuwait was). My intent was simply to illustrate that the typical antiwar knee-jerk insistence that there is absolutely nothing redeeming to war is ahistorical, and either childishly naïve or deliberately obtuse.

This is doubly so when it comes to the moralizing jackassery which says violence doesn’t solve anything. Violence, whether organized in the form of war or retail in the form of a street brawl, is essentially a morally neutral tool. And hence the context of its use matters. If I bludgeon an old lady for her purse, my use of violence is evil. If I bludgeon the guy mugging the old women, my use of violence is not only justified, it is morally required. Now, we may have interesting arguments about where the moral threshold for the use of violence in a given situation resides, but to say violence, i.e. war, is always and everywhere categorically prohibited is simply stupid.


But now that I got that out of the way, let me suggest, for argument’s sake, that war can be good for the economy. I must admit that I am tempted to quibble with the broken-window fallacy by noting that the parable fails to take into account technological improvements. If you have some irrational attachment to your old manual typewriter and I smash it in order to force you to buy a computer, the result may be that destruction was an economic boon for you. After all, with your computer you can be far more productive and efficient with your time, opening new opportunities for wealth creation.

But, there are a few problems with this hypothetical. First of all, I have no right to destroy your property if you aren’t hurting anybody with it. Second, you have better knowledge of your own productivity and ability to learn new things than I do and it’s entirely possible that your manual typewriter is the most efficient tool for your needs. Still, when you think about the typewriter analogy in terms of stagnant or broken cultures rather than individuals, one can envision a situation where this hypothetical offers some useful insights. But I haven’t thought it all through quite yet.

And besides there’s a better economic argument. In all but the most absurdly utopian laissez-faire societies (i.e. Hobbesian states of nature), criminals are legitimately subject to state action — as a matter of fact, that’s why we call them “criminals.” Criminals, we all know, do bad things like: form cartels, use coercive violence, violate property rights, break contracts, murder, blackmail, torture, and loiter with reckless abandon — and therefore the state has the right and obligation to bring them to justice.

We may think of morality and economics as different spheres, but they both fall under the rule of law. The moral argument against criminals is obvious: criminals are criminals, murder is wrong, justice is essential to the good society etc. The economic argument is slightly different but also obvious: The market cannot function properly if everyone doesn’t respect the rule of law, particularly property rights. If I murder my dry cleaner instead of pay him, it’s not just murder, it’s bad for business, which is why neighborhoods where dry cleaners get murdered tend be very poor. Besides, the Right has always argued that the right to pursue happiness is meaningless without the right to free enterprise and private property. Anybody who’s read this far, has to know what I’m talking about here.

Well, guess what? Saddam Hussein is a criminal, by any definition. No intelligent person can dispute this with any seriousness. And if he is removed from power and replaced with a benign form of government which respects the rule of law, there’s no disputing that this would be good for the Iraqi economy, even if we destroyed a bunch of roads, tunnels, bridges, etc. in the process. If a mobster has set up shop in your office so he can extort four out of every five dollars you earn, it’s in your economic interest for him to be arrested, right? Well, if the only way for that to happen is for a cop to break down your front door, you’d consider that destruction a small price to pay.

It may be contra-factual or even downright silly to say that raining bombs on Germany and Japan was “good for their economy.” But in a purely economic sense, that destruction was a transactional cost for doing something that was most assuredly a boon for the German and Japanese economies: the imposition of a functioning market economy. Even the staggering property losses incurred by those countries were, in a purely economic sense, a worthwhile investment for a functioning market system.

Sure, the destruction of Iraqi property may not be good for the Iraqi economy in the strict broken-window sense the paleo-libertoids keep invoking. But when you think of Iraq as being controlled by a crime syndicate, things become much clearer. Destroying this syndicate-a.k.a. “regime change” — is an effort at unlocking hidden capital. You could even say that the Iraqi economy is hobbled by a cruelly onerous “Saddam tax” and the war to remove him would be an effort at repealing that tax and lifting the barriers to trade his unsavoriness creates.

Let me give you one example. The brilliant economist Hernando de Soto has argued that the quickest way to save the third world is essentially to privatize it. The poor nations of the world are actually pretty rich. The problem is that their capital is not deeded. In other words, there isn’t a viable legal and financial system for people to liquefy and access their capital.

De Soto went to Egypt with a team of over 40 people and took an inventory on building stock and the land it stands on. “We found that the value of buildings that could not be transformed into capital were roughly 244 billion dollars and that these were owned and were lived in by roughly 90 percent of the Egyptian population,” he said in an interview with Tech Central Station. “Now,” he continued, “244 billion dollars is 55 times greater than all foreign investment in Egypt over the last 150 years or so, including the Suez Canal and the Aswan Dam. It is equivalent to 30 times the value of capital traded on the Cairo Stock Exchange. It is 100 times greater than all privatizations that have taken place in Egypt.”

Surely the situation in Iraq is even worse than in Egypt.

Now, I recognize that most of the paleo-libertarians who barraged me with this stuff about Bastiat’s window don’t really care about the people of Iraq if it means sacrificing any American blood or treasure. Fair enough, that’s an intellectually defensible position. But when you consider the fact that virtually all of the broken windows will be on Iraqi soil, it’s hard to see how they can say that destruction of property can’t be economically beneficial for the Iraqis (never mind what a stabilized and rational oil market would do for us).

What they could say, however, is that this is all an argument for being as surgical as possible in any war. The best solution — i.e. the one that costs the fewest lives and the least destruction of property — is to remove or kill Saddam and maybe a few dozen of his criminal cronies. Surely, one could see how that would be a moral and economic boon for the Iraqi people. And if you agree that killing him would be an economic boon, then the question becomes “How much is his head worth?” If, according to some de Sotoian analysis we could say that a free and functioning market economy would be worth, say, one trillion dollars to the Iraqis (not unreasonable when you think about it), then it’s probably worth — in cold economic terms — destroying quite a few buildings in order to do the job.

I think we should get rid of Saddam because it’s the moral thing to do and because it would be in the our natural interests (after all, the unseen cost of not doing it may be so much nuclear rubble at the next “ground zero”). But if destroying all those windows makes the Iraqis rich in the process, that’s great too. A rising tide lifts all boats.


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