Economics of War

People from all over the political spectrum hate Fukuyama’s The End of History and the Last Man, with its naïve progressivist-historicism, its post–Cold War /pre–Sept. 11 triumphalism, etc., so imagine my surprise when I started reading it and enjoying it (while of course finding lots to disagree with).

This is from the chapter “The Power of the Powerless”:

Before the Industrial Revolution, national wealth had to be extracted from the small surpluses eked out by masses of peasants living at or just above the level of subsistence in what were almost universally agricultural societies. An ambitious prince could increase his wealth only by grabbing someone else’s lands and peasants, or else by conquering certain valuable resources, like the gold and silver of the New World. After the Industrial Revolution, however, the importance of land, population, and natural resources declined sharply as sources of wealth in comparison to technology, education, and the rational organization of labor. The tremendous increases in labor productivity that the latter factors permitted were far more significant and certain than any economic gains realized through territorial conquest. Countries like Japan, Singapore, and Hong Kong with little land, limited populations, and no natural resources found themselves in an economically enviable position with no need to resort to imperialism to increase their wealth. As Iraq’s attempted takeover of Kuwait demonstrates, of course, control over certain natural resources like oil confers potentially great economic benefits. The consequences of this invasion, however, are not likely to make this method of securing resources seem attractive in the future. Given the fact that access to those same resources can be obtained peacefully through a global system of free trade, war makes much less economic sense than it did two or three hundred years ago.

Author: Sam Koritz

I like cheese.