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Cost of the Cold War

August 29, 2000

In my part of the country, an emotional and as-of-yet unresolved debate has been taking place about how to best dispose of sarin nerve gas that has been stored at a local Army base. It seems that the only solution to ridding the area of this deadly substance is to custom-build an incinerator to burn it at a cost of millions of dollars.

Needless to say, this solution troubles a number of people in the area, especially those who live downwind from the proposed incinerator site. We live in an era in which the newspapers chronicle new examples of government failure on a daily basis. If the government fails at this particular task, the results could prove deadly.

This ugly situation has much in common with the Russian nuclear submarine tragedy, which also falls under the category of government failure. Both situations have an economic component that is important to understand, especially now that the United States is more than a decade past the end of the Cold War and seems, sometimes, to be preparing for a new one. The economic component is that the full cost of any policy must be considered before lending moral and financial support to it.

This central economic lesson finds its way into every undergraduate economics course I teach, and it is not original. It comes from Henry Hazlitt’s Economics in One Lesson, which is perhaps the most concise and easy-to-read presentation of economic theory ever written for the general public.

Hazlitt differentiates between good economics and bad economics, saying that good economics considers the long-term consequences of policies and their effects on all groups. Bad economics, as you can guess, is focused on short-term results and the effects on individual groups.

Hazlitt came to mind more than once during the political convention season—now thankfully over—when representatives from both political machines claimed credit for the 1990s economic boom. The fact is that much of the recognition should go to policy changes that began in the late 1970s, coupled with a Fed-induced credit expansion dating back to 1991.

The full costs of maintaining an arms race, for both the Russian and American peoples, have been enormous, so much so that we have only begun taking stock. The loss in personal freedom and the growth of the national debt have been massive. And yet it seems that, ever so wily, our national priorities are shifting toward a new arms race with the Chinese. Before we commit ourselves to a new Cold War, shouldn’t we first assess the full costs of the last one?

Tragedies like that which befell the Kursk are going to happen. Nuclear and chemical waste that must be disposed of is stockpiled all over the US, not simply in my part of the country. The course of the US’s global presence today is a far cry from what was encouraged by President Washington in his Farewell Address, in which he said that the United States should defend its borders while offering trade with all.

That position is fully supported by the traditional idea of the "just war," which allows for military force to be used only when a nation’s survival is at stake or to overthrow an existing oppressive regime. Just War Doctrine developed over the centuries to clarify when war, which entails a grave act of killing, can be justified.

The framers of the Constitution wished to make it difficult to use the military for any other reason. It vested the president with a commander-in-chief, but gave Congress the power to declare war. Congress has officially declared war only five times in U.S. history, while the president has ordered military action over 200 times. As a result, today’s military has morphed into the president’s private army, to be used whenever sagging polls or special prosecutors threaten him.

Washington’s admonition also reflects the peace-preserving interdependencies that are created by international trade. Countries that depend on each other for the goods of life tend not to go to war with each other. Countries that isolate themselves from the world, or that are isolated by our government, are easier to bomb because doing so will not directly affect domestic markets. In all likelihood, Africa would have one more pharmaceutical plant today if the US allowed trade with the Sudan.

While certain domestic groups would stand to benefit from the creation of a new Cold War with China, dividing the world into pro-US and pro-Chinese blocks would encourage isolation and decrease the degree of human and international ties that are required to avoid war. Certainly, this is a cost that should be considered before committing our resources to such a course of action--not to mention the attendant proliferation of submarine tragedies and chemical waste incinerators that are sure to follow as well.

When James Madison wrote that "no nation could preserve its freedom in the midst of continual warfare," he was referring to costs of war that do not show up in accounting books or national budgets. These costs are real: In the name of national security, over 50 percent of discretionary spending is now appropriated to the maintenance of a national military, diverting capital from private use. The feds now claim the legal right to review every email you send and to limit your access and usage of firearms, while Army recruits train for domestic warfare.

These are just some of the costs that accompany the maintenance of a warfare state, in which survival of the central state trumps the preservation of personal and civil liberties. They are long-term consequences of policies embarked upon long ago. Since both major party platforms call for an expansion of the arms race, these are part of the full costs that must be compared to the full benefits that derive from unhampered free trade.

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Chris Westley, an adjunct scholar of the Mises Institute, teaches economics at Jacksonville State University. Send him MAIL.
See also The Costs of War.


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