Economists, guns and money: war by other means

Red Arrows Display in Portsmouth

Red Arrows Display in Portsmouth - by david.nikonvscanon (click for original)

I think it was at the Fairford Air Tattoo that I realised that people are a proxy for money in war.

The best ways to fatally weaken a country are to

  • destroy large amounts of capital
  • absorb large amounts of revenue
  • cripple the means of production

Wars are just a very noisy way of doing this, on purpose, to a country you don’t like. These days you don’t actually need to kill people but it is traditional because in pre-industrial times people were the means of production.

What I realised at the Air Tattoo was that modern weaponry is just lots and lots of money concentrated into a very small space: young men and women (each of whom cost several hundreds of thousands to train) take an item of equipment (which cost of hundreds of millions to build), and use it to destroy as much of the enemy’s invested capital in the form of people or hardware as quickly and cheaply as possible.

This is one of the reasons for the vastly disparate numbers of Iraqis and Allied troops killed in Iraq. Putting it simply, you have to kill more Iraqi civilians to have the same effect as killing just one Allied service man or woman, because Allied service men and women cost so much more.

Clausewitz told us that war is politics by other means, but it turns out that international finance can be war by other means.  Although I came to this conclusion all by myselfio, I’m not the first or the brightest to do so: while I was checking quotes for this post, I came across the following programmes:

War by other means: John Pilger and David Munro examine the policy of First World banks agreeing loans with Third World countries, who are then unable to meet the cripling interest charges.


War by other means: Trade is the lifeblood of the global economy – and it depends on rules decided in tough negotiations behind closed doors. Dr Ngaire Woods of Oxford University investigates.

All this thinking about money and war is because I’m reading Lords of Finance by Liaquat Ahamed. (This post is actually a book review, it’s just taken a time to get there). It’s a history of the crash of 1929. Very pertinent today, which is why I’m reading it. Ahamed is an investment manager, not an academic economist or an historian. He does not merely report the financial history of the 20s, he understands it.

Lords of Finance

Lords of Finance Liaquat Ahamad

Ahamed’s  explanation of the causes and consequences of what the Germans called the Diktat of Versailles is enthralling and utterly depressing. I was shocked to discover  that France’s revenge was made possible by American petulance and British ignorance. I already knew that France’s fear of another war imposed territorial losses and financial reparations on Germany so unjust and so ruinous they caused WWII. It’s clear from Ahamad’s account that this was still war with Germany, but fought with money not guns.

It’s a good book and  if you like your holiday reading to make you think, put it in your hand-baggage.

And since it’s always good to hear Warren Zevon, here he is “after a long day of improbable and grotesque mischief” feeling the need for guns and money, but not apparently economists.

8 responses to “Economists, guns and money: war by other means

  1. SonofRojBlake

    About seven years ago I had a row with my girlfriend and stormed out and drove around seething. I saw a sign saying “Secret Bunker – 2miles —>” and followed it. I had an education there. My grandparents told stories of what it was like living through a war. I now realise, thanks to the nuclear bunker museum, that I lived through a war too, but didn’t realise it at the time. It was a war conducted quietly and mostly in terms of money, and we (i.e. the west) won because the opposition ran out of cash, because they spent it all on weapons that would never get used.

    I’m curious, now, whether in thirty more years we’ll realise that we’re living through another global war, right now, another one fought with cash, only this time we’re on the losing end but it’s in the opposition’s interest to keep us “fighting”.

    China and the US have implacably opposed ideologies and the two most capable militaries in the world, but they will never go to war with each other for the simple reason that the US literally cannot afford to and China need not bother. If China had a serious problem with the US, they could cripple it far more effectively and quickly by simply selling off all the dollar investments they have and destroying the US economy overnight. I don’t understand a lot about global finance, but what little I’ve read suggests that China is advancing rapidly towards the point where such an action would not harm them in the way it might today. When they reach that point – stand by. Right now we have the concept of “the Third World”, a place of poverty and states in debt. Within my lifetime, I can easily see us getting to the point where “the Third World” is simply all of the world outside China.

    • Agreed on all points, SoRB. Star Wars was an economic arms race, not a technological one.

      • SonofRojBlake

        Andy Zaltzman has made the same point in two podcasts this week – at our peak, we (the world) had something like 65,000 nuclear weapons. In retrospect, it would probably have been better if we’d just had about 12. Would have been much cheaper.

        This was in the context of BP using a cheaper alternative method of making sure their oil rig didn’t blow up and cause a massive pollution incident… and how, when you take the reliable, expensive alternative, you always get a nagging feeling that it would probably have been OK to buy the cheaper one.

  2. This fits with the notion that we are NOT in a recession just now. A recession is like the condition Telogen Effluvioum ( where hairs, instead of falling out randomly, as they all age at different times, come out in clumps after their life cycles have become synchronised. Building and buying houses has always been a good investment and some people have always done it, but when just about everyone with money does it, you end up with a lot of houses and no-one to buy them. That is recession.
    What we are going through has elements of recession in it, hiding an underlying “deWesternisation”. Our economy is not slowing down, it is moving elsewhere. And to keep our show on the road, we are going to have to copy the way things are done in the east. That means low wages, and low public spending. My guess is that the subconscious realisation of this elected the current UK administration. It need not mean poor human rights and poor healthcare… or need it?

  3. I actually think we’re going through a multiple-whammy. The banking crisis / credit crunch was a real crisis (with ramifications for decades to come) with few if any non-Western factors. But, yes, the underlying events are the tectonic shift Eastwards.

    What will be interesting is when oil becomes so expensive that we have to sit on our own rubbish instead of shipping it to China or – horror of horrors – clothes are dearer than magazines and we have to wear them more than once and the pound shops are empty.

    Thanks for dropping by Daniel.

  4. Apparently the “best” weapons are those that main but don’t kill. Taking care of these injured veterans puts an big extra economic strain on the country and they also serve as a way to discourage a populace from supporting the war. Lovely, isn’t it.

  5. SonofRojBlake

    That’s a strategic view of the value of injurious but non-fatal weapons.

    The immediate tactical value is that if you shoot and kill a man, that’s one man, but only one man, out of action right away. If you shoot and *wound* a man, that’s him out of action, plus his buddies who will have to carry him back through the lines on a stretcher – one bullet could physically remove half a dozen guys from a fight almost immediately, plus the screaming won’t be doing the rest’s morale any good.

    This is part of the reason why the British Army replaced the old 7.62mm SLR with the 5.56mm SA80. A smaller round designed to tumble on impact causes nasty injuries but is less likely to kill.

    Kind of depressing that I know this stuff.

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