The War Conspiracy Game

Ever hear people say that World War II is what finally pulled the U.S. out of the Great Depression? I'm not sure if that's actually true because we were doing pretty well towards the end of the 1930s, but it got me thinking: How does our economic performance (Gross Domestic Product, specifically) correlate with war, if at all?

Fortunately for you, me thinking means making pretty graphs for the 4EConglomerate. Check out the graph of GDP growth over the past 77 years, with nice little labels for when we started warring and when we stopped warring:
See anything interesting? (Click on it, foo)

This was interesting to me:

Years in which the United States went to war were relatively large-growth years. These ones are green in the graph, by the way, with labels on the bottom. Years in which the U.S. was in the process of pulling out of a war were relatively very low-growth years. These are the red ones, with the 'exit' labels on the top.

Take a look at 1945-47, 1954, 1974 and 1991. All of these years saw massive U.S. military withdrawals from foreign countries - WWII, Korea, Vietnam and the Cold War/Gulf War respectively. Each one of those years were negative-growth years. Also notice that since World War II, there have been only 11 years with negative GDP growth, and 7 of them just happened to be years in which we were pulling out of wars.

Is this a coincidence? Is there some reason that WWII, Korea, Vietnam and the Cold War ended during years in which the U.S. was entering a recession? Is a soon-to-fail economy a reason to pull back military resources, or is a sudden loss of defense-related production and services harmful to the economy?

As much as it could be a coincidence, I'd lean toward the latter as a better explanation.

I could even understand Vietnam, of all the major wars we've had, being an example of a war that was abruptly ended due, in some part, to economic problems back at home, but look at the graph: From 1971 to 1979, GDP was growing just as strong as ever, with the only exceptions being the two years it took to withdraw from Vietnam, '74 & '75. Not only were these two years exceptions, they were very conspicuous and short-lived exceptions. Go ahead, check 'em out in the graph up there.

Since I made this graph you have to look at it, too:
(If you click on it you can see the original graph in the background. I think it helps illustrate the relative size of the GDP effects from entering or exiting wars, but I mostly figured it would be nice to see the upward and downward "pressure" in formal red-arrow style. That's my favorite style.)

Also, before I start chatting about this too much, all the officially-rock-hard data is in an Excel file, with some nifty colorization showing all the years of both major and minor U.S. conflicts, as well as a whole bunch of GDP figures. It's a ton of fun to look at if you're even remotely interested in what I'm talking about. The war info is straight from Wikipedia and the excel file is RIGHT HERE.


So it seems to me that there is some pretty good evidence that ending a war is just as hurtful as starting one is helpful.

This makes sense, too. Increasing government spending - especially the kind of deficit spending we're good at - helps production, output, productivity, etc. at the beginning of a war, but when the war is over, resources have to be reallocated, production of defense-related products and services ends and output (GDP) has to fall. When you go to war, GDP and economic output rises, when the war ends, output decreases.



Are you bored yet? Do you care if going to, or leaving, war is good/bad for our economy? If simple economic truths don't entertain you, I say we start playing the "Invent a Conspiracy" game. It'll be fun. Ready?

Here's what you do: Read these intriguing facts and see if you can invent a conspiracy to match:

1. Since 1940, every year that has seen negative GDP growth has been either immediately preceded by a U.S. conflict or immediately followed by one. (The middle colored column in the Excel file shows every year with a U.S. conflict, major or minor.)

2. That includes the recessionary quarters in 2001-2002, which preceded the wars in Afghanistan and Iraq.

3. As I mentioned before, 7 of the 11 negative-growth years over the past 66 years were years in which the U.S. was exiting major wars.

4. Every year the U.S. enters a major war turns out to be economically beneficial both for the year and for the duration of the war.

5. Three of the five major conflicts of the 20th century (Korea, Gulf War, Afghanistan/Iraq) were started right after official recessions.

6. Every major war after WWII was started within about a year of quarters that saw negative GDP growth. (Except Vietnam, which was a little more than a year. Of 241 quarters since 1947, there have been 11 groups of negative growth quarters - check out this Excel file.)

I'll give you a minute to make up your conspiracy theory while I'm thinkin' of mine. Don't worry, it doesn't have to be very good, just good enough to work on hippies.

OK, I'll go first:

The thing that is potentially disturbing is the fact that politicians (specifically presidents) have the ability to start reasonably expensive wars. If wars - specifically the funding involved in wars - can jump start an economy, should we be concerned about the president/Congress/etc. abusing this power? If you were the president, and maybe you were looking for more reasons (than you already had) to go to war, wouldn't the idea that you can boost the economy during your presidency, and help crush the economy during the next administration's term(s), be sort of tempting?

Let's pretend this is possible for a second, since we're playing the conspiracy game.

Let's just imagine that we live in a world in which politicians care a lot about injecting money into the economy via the military/defense infrastructure (like contractors/defense companies), calling it a war, or a conflict, if necessary, and at the same time ensuring that a minimum number of people in the country see economic hardship. Hypothetically, this is a big win-win situation for any politician.

Pretend that in this world politicians were willing to use military operations as excuses for spending on military contractors and other defense infrastructure in order to ensure [campaign] financing for themselves/their party/etc. in the future. Add that to the positive economic side effects and you've got a pretty popular politician. I know, I know - it's not possible right? But we're pretending!

If we lived in a world like this, where campaign financing and presidential legacies are both more important than decency and spending money properly, then what would we get?

Isn't it just possible that we'd have, say, a government that is very often at war and has a, say, um, random figure here... a $9 trillion deficit...?

Use your imagination: If we lived in that kind of world, then maybe that's what it would look like.

...

Now let's pretend that we were coming up on a recession as well as an end to a war. If you were the president, let's say the newly elected president, would you just let the recession happen and the war end? Would you just let the economy crumble slowly, hoping the Federal Reserve and the "spirit" of American consumers/investors will prevent your presidency, your reputation and your political party's future from turning into a Hoover-style disaster? Or would you do that other thing...

That thing that always seems to revitalize the economy and guarantee your presidency a second term...

You know... that thing that ensures the next candidate will get hit with your economic woes...

That thing that'll guarantee political and financial support from some of the richest companies and people in this country...

You know, go to war?

Of course you wouldn't, right? If you were president, you'd choose the moral high ground, right?

Of course.

But, alas, all this is just a conspiracy theory. Things are not that simple in the real world. In the real world, there are so many more other causes of war and other variables than any single citizen such as myself could possibly comprehend. In the real world, there are countless other choices besides just go to war or collapse. In the real world, lives are more important than legacies and riches.

And, don't forget, in the real world, when we go to war with Iran in 2009/2010 immediately following this next recession, I'm sure we'll have perfectly good reasons to do so.



Just kidding - that conspiracy theory totally sucked. Though I really had you going at the end there, didn't I? I'll try a little harder next time.

Fun game though, right? Let's play again in two years.