That war is of benefit to the business of voluntary exchange to mutual benefit is, as one of the last British bearers of the classical liberal flame, Norman Angell, remarked in 1909, the great illusion. Certainly there were some industries that gained, such as the makers of armaments, but on the whole society as a whole suffered a significant decline in its level of general welfare.
Long before Angell made the remark, a critique of the intensifying protectionism, imperialism, and armaments procurement of the period that preceded the outbreak of the First World War in 1914, the great classical liberal French economist Frédéric Bastiat had articulated the fundamental flaw in the arguments of such advocates of fiscal militarism.
Using his famous example of the broken window, Bastiat explained that when a window is broken, the cost of repairing it is obvious; the glazier gets paid, and their earnings can be easily seen. However, what is not immediately visible is what the window owner might have done with their money had the window not been broken—perhaps purchasing a new pair of shoes or investing in some other productive venture. The broken window fallacy, as it came to be known, underscores a critical economic insight: that which is seen (the glazier’s income) often obscures that which is not seen (the lost alternative uses of resources).
Applied to militarism, Bastiat’s insight reveals the hidden costs of redirecting societal resources toward destruction rather than creation.
As Washington exerts increasing control over the economy in the name of waging war and preparing to wage more, bragging for example about the apparent benefits accruing to American corporations and workers, resultant from helping fuel the fighting in Ukraine, arms sales to Israel, or the increasing militarization of the Taiwan Strait, it has never been more important to counter statist propaganda about the economic beneficence of war.
As per usual, none such propaganda looms larger than that surrounding World War II, which every properly public schooled child knows, put an end to the Great Depression, ushering in levels of prosperity Americans had not seen in a generation.
In thoroughly debunking this tired propaganda, no one has done more than the great economic historian Robert Higgs. His book Depression, War, and Cold War: Challenging the Myths of Conflict and Prosperity, published two decades ago, remains essential reading for those who would combat the dangerous advocates of another crazed bout of fiscal militarism on the basis of the argument that “it worked so well the first time!”
Higgs dismantles the myth that World War II brought about true economic prosperity. He effectively shows that while wartime production increased GDP and reduced unemployment, these metrics were not reflective of genuine economic well-being for the general population. The war effort directed resources away from consumer goods and toward military production, leading to widespread shortages, rationing, and a decline in the standard of living for ordinary Americans. This phenomenon, which Higgs terms “wartime prosperity,” was a superficial and misleading indication of economic growth.
Higgs also challenges the popular narrative that government spending during the war laid the foundation for the U.S. economy’s post-war boom. He demonstrates that the apparent recovery was not a result of wartime economic policies but rather of the robust private sector investment and consumption that followed the war’s conclusion. When the government finally scaled back its interventions in the economy, private enterprise was able to flourish, spurring sustainable growth and prosperity.
A significant aspect of Higgs’ analysis lies in his focus on opportunity costs, much in line with Bastiat’s insights. He underscores how the vast resources channeled into the war effort represented a monumental redirection of labor, capital, and raw materials that could have been employed in productive, wealth-generating activities. Far from being an economic boon, the war effort was a massive drain on the potential for civilian prosperity.
In his article “Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s,” Higgs provides an even more detailed critique. He highlights the contradictions in measuring economic success through metrics like GDP during wartime. For example, building tanks and bombs might boost GDP, but they do not directly contribute to improving living standards. Instead, they represent resources consumed in a manner that provides no lasting benefits to society. Higgs’ work challenges policymakers and historians alike to rethink the conventional wisdom about war and prosperity, reminding us of the destructive illusions inherent in such narratives.
As the U.S. government continues to inflate its military-industrial complex under the guise of fostering economic prosperity, the lessons of thinkers like Bastiat, Angell, and Higgs are more relevant than ever. War, far from being an engine of growth, remains a destructive enterprise, consuming resources that could otherwise be used to improve the lives of millions through peaceful and productive means. If history is any guide, the belief that military spending brings economic salvation is not only illusory but deeply dangerous, threatening both individual liberty and the economic welfare of society.
