War is the Answer

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I was having dinner with a friend who is smart about business and I asked him what he thought was needed, what with the Euro crisis, America's anemic recovery and China's slowing growth, to get the global economy going again. His answer was one word: war.

It's true that periods of great growth often follow wars. There's all that rebuilding to do, and fewer people to do it. It's kind of depressing, though, to think that war is the only way back to prosperity.

We have the oldest economic system in the world, the only one really: producing and selling goods and services. There's a natural limit to commercial activity, though. When people don't have money, they don't buy. Producers cut back. Growth stalls.

A half century ago, the economist John Kenneth Galbraith suggested that we could not, over the long term, buy and sell ourselves into prosperity. He advocated more public works. By building roads and schools, modernizing electric grids, desalinating seawater, vaccinating against disease, we not only put people to work today but lay the foundations for the future.

But most infrastructure investments don't make money quickly enough to attract private capital, so they depend on government funding. Government spending is a tough sell these days, with austerity being the buzzword in many capitals. Not many have the stomach for raising taxes or taking on more government debt.


So where does that leave us? On our current path we seem unlikely to have enough global economic growth to support burgeoning worldwide populations. Like an overbreeding species in a tiny patch of wilderness, we are outgrowing our economic habitat. Without more coordinated governmental support for the foundations of prosperity -- clean water and air, food production and distribution, education, health care, scientific research -- we may be destined, as my friend suggests, to end up fighting over scarce resources. That will be good for business, but little else.

With a Perspective, I'm Mac Clayton.

Mac Clayton is an author living on the Peninsula.