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Home | Mises Library | War's Winners and Losers

War's Winners and Losers

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Tags Big GovernmentTaxes and SpendingWar and Foreign PolicyFiscal Theory

03/26/2003Christopher Westley

"The way to eternal peace does not lead through strengthening state and central power, as socialism strives for."  Ludwig von Mises, Nation, State, and Economy, p. 96.

The market system is based on voluntary exchanges that result in interdependencies that, over time, make war all but impossible. This is why governments that intend to bring about war work to isolate the targeted country economically as a prelude to the infliction of directly destructive violence. A decade of economic sanctions in Iraq has served the purpose of making some sort of war in Iraq possible, even inevitable. 

When assessing the costs of this war, the full costs, including the costs on the home front, must be considered every bit as much as the money costs. Sadly, the most expensive aspects of war involve damage done to the culture. These costs are the least understood and the hardest to measure, and are therefore more easily ignored. 

This is especially true in an age of reality television, which allow the news reports coming from Iraq to assume a surreal quality. Is it news or is it entertainment?  In my part of the country, the war is even dominating sports radio, as though the U.S. team is simply engaging in a tough road match. 

The money costs alone will be considerable. Now that President Bush has proposed a $75 billion supplementary budget to Congress to fund the U.S. contribution to the war we have a glimpse of what these costs may be. According to the Voice of America, "the proposed budget includes a request for nearly $63 billion to cover actual war costs as well as the global war on terrorism. It also allots about $4 billion for increased homeland security and roughly $8 billion for humanitarian aid and reconstruction in Iraq."

However, this funding request is merely a down payment. While most now agree that the minimum estimated cost will greatly exceed $100 billion, no one is sure what the maximum cost may reach. 

Even taking into consideration the eventual contribution of Iraqi oil profits toward reducing the final bill, Yale professor William Nordhaus estimated a worst case scenario costing $1.2 trillion, which includes the effects of possible war-related shocks to the economy. Nordhaus' research is supported by a Council of Foreign Relations study that estimates that the U.S. may need to station 75,000 troops in Iraq and spend $20 billion a year "for several years."

This spending amounts to wealth transfers from the private uses to those approved by the state, with all of its attendant waste and fraud. As the economy struggles to emerge from one of the worst economic downturns since the Great Depression, billions of dollars of what otherwise could have been used for private investment will be used to prop up governments in the Middle East, hindering the ability of markets to maintain their current meager growth levels. All the while, the sphere of socialism will grow. Is regime change in Iraq worth it?  

A much bigger threat to our freedom is an overweening state that plays on our fears to justify the appropriation of even more money to special interests, the mobilization of which will ensure that it stays in power. It is no accident that much of the president's proposed supplementary budget request will direct funds to firms that played a crucial role in his election and whose support is essential to his reelection next year. 

These firms, some of which are listed below, would be much smaller in size and profitability today if they had not become so dependent on decades of government contracts. Directing tax dollars their way allows the political class to achieve dual goals of buying crucial political support while also increasing the government sector's contribution to GDP growth. 



Total Contributions* (1999–2002) 

Percent to Democrats* 

Percent to Republicans* 

Total to George W. Bush*^

Bechtel Group





Halliburton Co. 




Fluor Corp. 





Parsons Corp. 





Louis Berger Group










* Based on data released by the Federal Election Commission on March 5, 2003. Totals include PAC, soft money and individual contributions to federal candidates, party committees and leadership PACs, 1999–2002. ^ These figures are included in the total contributions, 1999–2002. Source: The Capital Eye.

Firms such as these represent a sliver of the groups in society that benefit from large government and have an incentive to maintain it. They are the net tax consumers. Their very presence institutionalizes divisiveness in society by pitting the anointed (who get benefits) against the un-anointed (who are forced to fund them). The results are destructive to civilization and demeaning to our culture.

As Ludwig von Mises noted in Liberalism, "The parties of special interests, which see nothing more in politics than the securing of privileges and prerogatives for their own groups, not only make the parliamentary system impossible, they rupture the unity of the state and of society."  Indeed, they create incentives for the state to become aggressive against those segments of society that do not help it remain in power.

These segments are much more easily belittled and discredited during wartime, which explains much of the drive to war in Iraq. In an era in which big government has been under serious intellectual and cultural attack, war is a tool that unites the country around the state. Absent war, the raison d'tre of the Leviathan state is lost. 

When a culture treats any action that involves the grave act of killing in such a manner, it is in serious trouble, because it implies that it has become less vigilant in restraining the state's natural tendency toward aggression. By legitimizing aggression abroad, culture becomes more aggressive at home. This implies that when governments engage in slaughter, children are taught to settle conflicts violently and the primacy of the human person is devalued. Many soldiers find returning to civilian life too difficult after being desensitized and demoralized in order to survive on the battlefield. These are cultural costs that should be included in economic assessments of the war in Iraq.

The manifest lesson of the previous and bloodiest century is that large centralized states tend toward socialism at home and aggression abroad, while small decentralized states respect individual liberties while tending toward peaceful relations with other countries based on trade. In this light, Operation Iraqi Freedom may be more aptly labeled Operation More Socialism at Home.

These are some of the reasons why many who write in the classical liberal tradition are so concerned

about the war in Iraq. It portends to divide the country economically (favoring the expansion of the public sector over the private) and to weaken it culturally. Victory in this war and those that follow will prove to be Pyrrhic ones if Western culture becomes collectivist in the process.

Indeed, fights such as that are not worth engaging. 

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