Tag Archives: Treaty of Versailles

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.

And

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.