War, peace, and the world economy

So today I’m watching stock markets around the world go into free fall, and the following set of thoughts struck me.  For starters, what if the world economy hits a "perfect storm?" The United States is already well on its way to a "lost decade," mostly because the Bush administration created an enormous mess and ...

Walt-Steve-foreign-policy-columnist20
Walt-Steve-foreign-policy-columnist20
Stephen M. Walt
By , a columnist at Foreign Policy and the Robert and Renée Belfer professor of international relations at Harvard University.
Wikimedia Commons
Wikimedia Commons
Wikimedia Commons

So today I'm watching stock markets around the world go into free fall, and the following set of thoughts struck me.  For starters, what if the world economy hits a "perfect storm?" The United States is already well on its way to a "lost decade," mostly because the Bush administration created an enormous mess and Obama, his advisors, and the Congress combined to do too little back in 2009. Europe is still teetering on the brink of meltdown, and some people have real concerns about China's overheated and opaque economy too. And these problems are all connected, and not just by bad loans, credit-default swaps, and the like. If any of these big economies heads back into recession, that will slow the others and could -- in the worst case -- sends us spiraling back down into the sort of economic tailspin not seen since the 1930s.

I am not an economist, and I have no idea how likely that "perfect storm" scenario is. But remember that what ultimately got the United States out of the Great Depression was World War II. Suddenly there was a war to win, and the American people didn't mind deficit spending and didn't mind devoting over 40 percent of GDP to defense. And they also accepted that sacrifices would be needed -- rationing, scrap drives, a draft, and the like -- and the war muted the partisan wrangling of the 1930s. That gigantic Keynesian stimulus finally got the economy roaring to life.

So here's my question: in the nuclear age, the danger of a World War II-style global conventional war is greatly reduced, and maybe even impossible.  And even the most hard-edged realist would have trouble finding the equivalent of Nazi Germany or Imperial Japan in today's world (by comparison, the Islamic Republic of Iran, with a $10 billion defense budget that is less than 3 percent of U.S. national security spending, isn't remotely in the same league).  So if the world were to fall into an economic abyss and a big conventional war is neither likely nor desirable (and let me make it clear that I think replaying World War II would be a VERY BAD THING), then how would we dig ourselves out? And how long would it take, especially when you consider just how dysfunctional, fact-free, and irresponsible our politics has become.

So today I’m watching stock markets around the world go into free fall, and the following set of thoughts struck me.  For starters, what if the world economy hits a "perfect storm?" The United States is already well on its way to a "lost decade," mostly because the Bush administration created an enormous mess and Obama, his advisors, and the Congress combined to do too little back in 2009. Europe is still teetering on the brink of meltdown, and some people have real concerns about China’s overheated and opaque economy too. And these problems are all connected, and not just by bad loans, credit-default swaps, and the like. If any of these big economies heads back into recession, that will slow the others and could — in the worst case — sends us spiraling back down into the sort of economic tailspin not seen since the 1930s.

I am not an economist, and I have no idea how likely that "perfect storm" scenario is. But remember that what ultimately got the United States out of the Great Depression was World War II. Suddenly there was a war to win, and the American people didn’t mind deficit spending and didn’t mind devoting over 40 percent of GDP to defense. And they also accepted that sacrifices would be needed — rationing, scrap drives, a draft, and the like — and the war muted the partisan wrangling of the 1930s. That gigantic Keynesian stimulus finally got the economy roaring to life.

So here’s my question: in the nuclear age, the danger of a World War II-style global conventional war is greatly reduced, and maybe even impossible.  And even the most hard-edged realist would have trouble finding the equivalent of Nazi Germany or Imperial Japan in today’s world (by comparison, the Islamic Republic of Iran, with a $10 billion defense budget that is less than 3 percent of U.S. national security spending, isn’t remotely in the same league).  So if the world were to fall into an economic abyss and a big conventional war is neither likely nor desirable (and let me make it clear that I think replaying World War II would be a VERY BAD THING), then how would we dig ourselves out? And how long would it take, especially when you consider just how dysfunctional, fact-free, and irresponsible our politics has become.

Stephen M. Walt is a columnist at Foreign Policy and the Robert and Renée Belfer professor of international relations at Harvard University. Twitter: @stephenwalt

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