Our great Senior Fellow Alex Pollock has pointed out that the reason Napoleon created the Bank of France was to make sure there was a bank that would always lend him money. Napoleon, of course, needed immense amounts of money because the French state was almost constantly at war during his reign. Having a central bank at his fingertips made it a lot easier for Napoleon to wage his wars on the rest of Europe.
Napoleon was a pioneer when it came to understanding and augmenting state power. He created what is recognizable today as perhaps the first modern national security state, with an economy and political system devoted overwhelmingly to war.
The Bank of France was crucial to all of this. At the center of any militaristic state are the institutions necessary to fund the state and its wars. This is as true today as it was two centuries ago. The power to tax, spend, regulate, and inflate is inseparable from the power to make war. Indeed, it is essentially impossible to discuss wars and foreign policy without considering the state’s extraction of resources from the domestic population.
In this issue of The Misesian, we take a look at how states use their fiscal and financial powers to convert the productivity and resources of the private sector into warmaking power for the state’s elites. These insights are drawn from our inaugural Revisionist History of War Conference, which was held at the Mises Institute this past May. The conference brought together more than a dozen economists, historians, and other commentators to share their findings on the intersection between warfare and state power.
Two of the lectures have been adapted for readers in these pages. The first is by our Senior Fellow Peter Klein, who examines how state-funded research turns science and technology toward the state’s warmaking priorities. Key to this process, Klein shows, has been the use of taxpayer funds to co-opt private-sector research and talent. By making government contracts lucrative, and by crowding out private dollars, the US government has redirected an enormous swath of research and technological development activity toward its own government sector. It is no coincidence that the American tech sector works so closely with the US government’s intelligence agencies and military institutions. Since 1945, the federal government has come to dominate the tech sector with seemingly endless contracts and grants paid for by American taxpayers. This has also created a new class of scientific experts who rely on government funding for much of their work.
The second lecture featured here is by Henry Hazlitt Research Fellow Jonathan Newman. Newman looks at the critical role of the Federal Reserve in financing the US government’s wars. Discussion around the Federal Reserve has often focused on the myth that the central bank is independent in that it is indifferent to the political priorities of elected officials. Newman shows that this is certainly not the case, and that when it comes to war, the Fed has always been thoroughly compliant in stepping in to “print” money to fund the government’s wars. Specifically, Newman examines the Treasury-Fed Accord of 1951, which allegedly solidified Fed independence for decades afterward. Newman shows this narrative is not accurate at all. Ultimately, the facts of history support Ron Paul’s observation that “It is no coincidence that the century of total war coincided with the century of central banking.”
Readers will find much more in this issue of The Misesian as well, including a new book review from David Gordon, a short lecture by Joseph Salerno, and the latest news from the Mises Institute.
