Economics and War
Jude Wanniski
April 23, 1999


Money is said to be the root of all evil. It is almost certainly the root of most wars in the history of the world. On the surface of conflict between nations, there may seem to be cultural differences that triggered the war, but if you peel away the superficial cover, you will get down to money -- by which we mean claims on resources. Because the first goal of any individual or institution is survival, it must be able to sustain itself with claims on resources. When there are not enough resources to go around in a region, now or back at the dawn of civilization, leaders begin to speak of how unfair it is that the folks on the other side of the mountain have more than they need. The next thing you know, blood is spilled until the land can support those who remain. To the victor belong the spoils. When there are no neighbors to contest resources or arable land, the decisions of the wise men led to abortion and infanticide in order to make the available resources meet the caloric needs of the people. In a most basic sense, I like to say all serious conflict is over calories, either the kind you eat or the kind you burn for heat.

At the fount of the world's great religions were teachings of the sanctity of human life, to discourage infanticide and encourage the idea that the least of human life could, if allowed to live instead of being aborted, could save the entire nation. Judaism began with the law of Abraham, who came close to sacrificing his son until God told him he did not have to do so. Moses, who as an infant was put in a basket and pushed out to sea, would of course have died if Pharaoh's daughter had not spotted the basket caught in the reeds. Jesus might well have been aborted or killed at birth, as Mary was carrying a child not conceived by her betrothed, Joseph. But Joseph was made to understand that the child was conceived by the power of the Holy Spirit. Muhammad could neither read nor write, but the Holy Qur'an, the divine message of God, is said to have been revealed by God and directly transmitted to Muhammad. Islam, the most ecumenical of all the monotheistic faiths, was born as an amalgam of Judaism and Christianity.

Still, political leaders are chosen to sustain the caloric needs of their people, so wars exist even among those who pray to the same God. If you are a small people and have a caloric deficiency, you can hardly hope to acquire what you need from your large, rich and powerful neighbors by attacking them. They will wipe you out. So you become pirates, stealing from them when they ride out from behind their city walls, or you sneak in and sell them things they cannot buy in their own regulated markets. Cocaine perhaps.

Saddam Hussein invaded Kuwait in 1990 because Iraq had been bled white in its long war with Iran -- a war which itself was the outgrowth of the inflation in oil prices that followed the end of the Bretton Woods gold standard in 1971. The people of Iraq had sacrificed their sons in defense of the interests of the playboy emir of Kuwait against the Islamic fundamentalists of Tehran. Now, Kuwait not only was cheating on its commitment to the other oil-producing nations to keep production at an agreed-upon level, thus causing the price of oil to fall, it also was drilling at a bias under its border with Iraq, stealing oil from the Iraqis. Facing international bankruptcy, Saddam asked neutrality from the U.S. regarding Iraq's plan to take back the oil fields that had been taken away from Baghdad by the British after World War I, when Kuwait was created by the Brits on the promise of discount prices on Kuwaiti oil. The fight was over calories. Having screwed up royally by giving Iraq the green light, the Bush administration reversed course, demonized Saddam as the new Hitler, and rounded up the power and resources for the Gulf War. The United States, the richest and most powerful nation in the history of the world, was set on this evil path by leadership blunders, and has continued to this day, bombing Iraq after having starved and poisoned to death more than 1.4 million Iraqi civilians, to cover-up the earlier evil steps. Remember that Money (claims on bread and fuel) is the root of all evil.

The reason the United States has become the world's sole superpower, after several millennia of competition among governing bodies for that honor, is that our Founding Fathers gave us a Constitution that made our democracy work better than all the others. All the pressures among our leaders incline in the direction of Evil, but the Constitution and the political system that have evolved have given the masses of ordinary people the power to overcome the disposition toward evil, and sometimes they can. But not always. We had nothing to do with kicking off World War I, which was an outgrowth of the tariff wars among the European powers in the decades preceding Sarajevo. The net result, though, was the advance of the United States as the primary global leader. It was our inexperience as global leader, though, which put the world on the track to WWII.

In Chapter Seven of The Way the World Works, I describe how Evil overtook our Political Establishment in 1929, with the passage of the Smoot-Hawley Tariff Act, purposely designed to prevent the lesser countries of the world from sending their goods across our city wall. It was a truly Evil act, driven by money and greed, and I demonstrate beyond reasonable doubt, I think, that it caused the Wall Street Crash of 1929. To this very day, though, the Political Establishment refuses to acknowledge my discovery. It is too embarrassing for them to acknowledge that what their fathers and grandfathers did led straight to World War II. Japan, a nation with lots of people and no means to produce calories, had no choice but to go to war against us. History will accept that as the fact a hundred years from now, but for now the Political Establishment pretends that the gold standard caused all our problems. If only the Federal Reserve had printed lots of paper money, there would have been no Great Depression. That's the Holy Writ according to the conservative wing of the Establishment. The liberal wing insists that the Crash and the Depression occurred because the free market does not work without the control of a wise liberal elite. The Crash was caused by speculators.

World War II was not the only war into which we blundered because of bad economic policy. Our adventure in Vietnam was conducted by leaders who had graduated from Kindergarten, but were still at the level of high school sophomores. As I described in my book, it was the Roman Catholic Church (my church, by the way) that persuaded the Catholic President John F. Kennedy to support the Catholic president of South Vietnam, Ngo Dinh Diem, against the godless communists of Hanoi. The road to hell is paved with good intentions, even for Catholics, (perhaps especially for Catholics), so our President in 1961 sent a team of our best Keynesian economists to Saigon. At the time, the rebellion against the Saigon government was on the level of two-bit terrorism, with a handful of Viet Cong in black pajamas following the pattern of Fidel Castro and his small band of insurrectionists. In one year after JFK bombed Saigon with John Maynard Keynes, the national economy was in a state of total disarray. The economists had insisted that in order to win the minds and hearts of the people, Diem had to tax the rich and give to the poor. If he refused to do so, Kennedy said he would get no military help from us. When the economy slid into recession and the budget went into deficit, the economists blamed the overvalued piastre, the Vietnam currency. Devaluation led to further collapse in the urban areas.

Whereupon liberal Republicans in the U.S. got behind the idea of having the Saigon government buy land from the rich peasants and sell it to the poor peasants. Everywhere this policy was instituted, the farm economy collapsed. The poor peasants had neither the intellectual nor the financial capital to make the little plots profitable enough to even pay interest on their mortgages. Starved for calories, the farmers became communists. (I have to admit that as a columnist for the National Observer at the time, I wrote glowingly of this "Land to the Tiller" program, thus making my own contribution to Vietnam's woes. What I never did, though, was demonize Diem. The NYTimes correspondent, David Halberstam, led the liberal Establishment in vilifying Diem as the culprit. Alas, Kennedy had no choice but to give the green light for Diem's assassination. JFK never cleared the contract on Diem with New York's Cardinal Spellman, the cleric who talked him into backing Diem. A month later, JFK was dead by the bullets of an assassin or assassins. You can believe what you wish, but I have no doubt the Establishment deemed it necessary to make Lee Harvey Oswald the lone gunman. It then took the lives of 55,000 American soldiers to clean up the mess we made, not to mention the millions of Asians who lost their lives.

What about the Balkans? Those of you who have been following this website regularly know that Yugoslavia was destabilized by the same brand of economists who gave us Vietnam on a platter. The federation's market socialism was working like a charm under Marshal Tito and then his protégé, Slobodan Milosevic. In 1987, the International Monetary Fund, which is an agent of our Political Establishment, our Ruling Class, decided it was necessary to guide Belgrade away from market socialism toward market capitalism. Why should they buy GE light bulbs if they can make their own? Shock therapy was the IMF answer. Overseeing the process was our Ambassador to Yugoslavia, Lawrence Eagleburger, the same fellow who a few years later as Deputy Secretary of State gave Saddam Hussein the green light to invade Kuwait, although Republicans blamed April Glaspie, the U.S. ambassador to Baghdad who was following instructions from Eagleburger (the largest of Henry Kissinger's inept protégés.)

It was also Eagleburger, the "expert" on the Balkans, who gave Croatia and Slovenia the green light to secede from Yugoslavia, when those richer republics decided they no longer relished sending taxes to Belgrade to pay the IMF interest on its loans to Milosevic. As the other constituencies of the federation decided they too wished to stop sending taxes to Belgrade, the union was is dissolution. And because ethnic Serbs now lived throughout the region, in Croatia, Slovenia and Bosnia, the people of Serbia wished to look after the interests of their brethren there. Milosevic won elections because he did what the Serbian people wished him to do, all the while trying to fix his own economy and the remaining republics of Serbia and Montenegro. Because of a caloric shortage in Serbia's Kosovo province, some ethnic Albanians decided they could do no worse that detach themselves from Yugoslavia. They formed the Kosovo Liberation Army, again following the Castro approach that had also been successful for Ho Chi Minh, except now with Muslims in charge.

That should bring us up to date, with Milosevic fully demonized, as our Establishment-controlled press demonized Castro, Ho Chi Minh, and Saddam Hussein. The WSJournal, which is the media agent of the conservative Establishment, is the leader of the War Party and author of Milosevic-as-the-new-Hitler image. Having been part of the process that destabilized both Russia and Yugoslavia with "Shock Therapy," the WSJ's chief interest now is in covering up its intellectual blunders by sweeping them under the rug. The WSJ takes every opportunity it can to blame Vietnam on the liberal wing of the Establishment, but Yugoslavia is its baby and it will remain in denial until time passes and new editors arrive.

The Establishment argues that we still have to contend with the stubbornness of the Serbs in refusing to admit they made all the mistakes, not the U.S. Political Establishment. In the NYTimes yesterday, William Safire threw a hissy fit over the craven cowards in the White House who refuse to send 55,000 American soldiers to their Creator in order to cover up the errors made by Safire's team. Safire is now and has always been a flack for the Establishment. His recent columns on the marvelous foreign-policy brainpower of Texas Governor George W. Bush were actually dictated by a fellow named Richard Perle, who now sits at the elbow of the young Bush to tell him what he thinks. Perle is the Establishment's agent, as is the governor. An old comrade in arms of mine, when we were all fighting the Cold War, Perle also dictates the WSJournal editorials and on the side advises Bob Dole, who passes on his Perles of wisdom to Liddy Dole -- who has broken her silence on Kosovo and now supports ground troops. The Establishment does not care who wins the GOP nomination, as long as it is not Dan Quayle.

"Authority is at stake" exactly as it was said to be at Waco. When those damned Branch Davidians refused to give up, no matter how many diplomats were sent to negotiate with them, it was no longer a matter of who was right or who was wrong. The state could not be defeated!!! So President Clinton gave Attorney General Janet Reno the authority to rescue the wives and daughters of the bad guys inside, and Ms. Reno pulled the trigger that blew them all to Kingdom Come. In Kosovo, we have President Clinton now being condemned as a weenie by Bill Safire for not dropping the BIG ONE on the damned Serbs. Senator Bob Torricelli [D-NJ], one strange fellow who thinks for himself, is whispering in the President's ear about how Waco was followed by the bombing in Oklahoma City, and that worse terrors may follow unless he now tells Madeleine Albright that he is calling off the incineration of an entire people.

Speaking of Holocausts, the Jewish institutions that are card-carrying members of the Political Establishment are taking out ads in the NYTimes in support of our "war" against Serbia. Not columnist Abe Rosenthal, former executive editor of the Times and now its chief Israeli defender. Rosenthal remembers how the Eastern Orthodox Serbs stood up to Hitler in WWII while the Catholic Croats were playing footsie with Adolph. This whole business makes him queasy. Unless he wises up, we expect the Establishment will advise the Times editors that Abe is now of permanent retirement age. This is the way things work. The Constitution and its "First Amendment" allow me to write and say these things publicly, which is mostly how the real stuff gets out.

I think this is enough about economics and war for one day. Let's open it up for questions.