Cold War Economics – That Demmed, Elusive Pimpernel

As chief spy-catcher Chauvelin chased that demmed,[1] elusive Scarlet Pimpernel to no availThe Scarlet Pimpernel Book Club 20116 in 1793, I have gone to great lengths to understand the legacy of Cold War Economics.  Until recently, Chauvelin and I were vying for first place in the ‘we-don’t-get-it’ category.  That “Aha” moment was not accompanied by a drumroll or lightning bolt, it quietly unfolded in Peter J. Boettke’s The Mystery of the Mundane  in the November issue of The Freeman Magazine.  In Boettke’s words, I was outfitted with the right lens to be amazed by the mystery of the mundane.

Cold War economics in the U.S. was a coup d’état played out over sixty years in slow motion.

Lieutenant General Walter Krueger, Commanding General, U.S. Sixth Army (left), General Douglas MacArthur, Supreme Commander, Allied Forces, Southwest Pacific Area, and General George C. Marshall,  Chief of Staff, U.S. Army (right)  At a field headquarters in the Southwest Pacific Area, late 1943. (Photograph from the Army Signal Corps Collection in the U.S. National Archives. Photo #: SC 183951)

Lieutenant General Walter Krueger, Commanding General, U.S. Sixth Army (left), General Douglas MacArthur, Supreme Commander, Allied Forces, Southwest Pacific Area, and General George C. Marshall, Chief of Staff, U.S. Army (right) At a field headquarters in the Southwest Pacific Area, late 1943. (Photograph from the Army Signal Corps Collection in the U.S. National Archives. Photo #: SC 183951)

The government toppled the people.  Using a cycle of fear and legislation, the federal government consolidated power in an ever increasing spiral over time.  General Douglas MacArthur, in his book A Soldier Speaks, said it best, “Our government has kept us in a perpetual state of fear—kept us in a continuous stampede of patriotic fervor—with the cry of grave national emergency. Always there has been some terrible evil at home or some monstrous foreign power that was going to gobble us up if we did not blindly rally behind it by furnishing the exorbitant funds demanded. Yet, in retrospect, these disasters seem never to have happened, seem never to have been quite real.”

Robert Higgs’ research article, The Cold War Economy; Opportunity Costs, Ideology, and the Politics of Crisis published in 1994 illustrates how the Cold War forever changed the cost and use of the military.  Higgs states that:

“Before World War II the allocation of resources to military purposes remained at token levels, typically no more than one percent of GNP, except during actual warfare, which occurred infrequently. Wartime and peacetime were distinct, and during peacetime—that is, nearly all the time—the societal opportunity cost of “guns” was nearly nil. The old regime ended in 1939. The massive mobilization of the early 1940s drove the military share of GNP to more than 41 percent at its peak in 1943-44.   Despite an enormous demobilization after 1944, the military sector in 1947, at the postwar trough, still accounted for 4.3 percent of GNP, three times the 1939 share.”

Higgs focuses on the impact of the military on the economy, but there is so much more.  The political leaders in Washington, D.C. cut their teeth on using the Cold War to justify military spending and, in the process perfected the technique of generating, then using, crisis to strip state and individual rights and absorb that power into the central government.  The economic legacy is, then, the process of using fear to loosen American’s pocketbook to centralize power.  Americans, then, unintentionally chose to enable economic enslavement.

Initially, the learning curve was steep.  By 1947, American’s had elected a Republican Congress and sent them to Washington with a mandate to kick-start peacetime.  After all, the U.S. had done its bit during WWII and now it was time for the soldiers to come home and get on with the business of living.  Few Americans cared whether or not England wanted out of Greece.  According to Princeton’s description of the advent of the Truman Doctrine, “Truman made the plea amid the crisis of the Greek Civil War (1946–1949). He argued that if Greece and Turkey did not receive the aid that they urgently needed, they would inevitably fall to communism with grave consequences throughout the region.”  The Truman administration prevailed with a trickle of money that heralded the Truman Doctrine, which was the policy of the United States to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures.  The precedent was established; the bigger and better the crisis the easier to get money and power.  Not surprisingly, the crises got bigger and better.

The Truman Doctrine became the template and was followed by other policies that governed massive retaliation, mutual assured destruction (MAD), the Reagan Doctrine and military commitments such as NATO, bilateral defense treaties, U.S. military “advisers” in Latin America and so on.  A standing military was built and most Americans hardly noticed.  After all, it was a scary world out there.

The economic consolidation and centralization process worked brilliantly and was, therefore, expanded.  The federal justice department used the process following the Kennedy assassination. A federal murder statute, formerly a state’ prerogative was enacted.  The EPA resorted to consciously seeking a crisis to consolidate power and came up with asbestos as a starting point.  A colleague participated in those EPA meetings in California and has the documentation to prove it.

Congress ran out of time and energy to centralize economic and political control so they increased the number of agencies, like the EPA, who write regulations that violate individual contractual and property rights with abandon.  Every crisis, real or imagined, is met with a flurry of legislation that further centralizes the economy.  The enforcer for all these actions has, until recently, been the IRS.  Of late, there is increasing indication that the aggression of the IRS will be supplemented with the domestic violence inherent in the DHS and the might of the standing military that may be used against Americans.

To be certain, there were little conspiracies that punctuated the American citizen’s road toMoynihan economic enslavement. There was, however, no overarching conspiracy in federal government to become the government ousted by the founding brothers.  Individual Americans are responsible but not to blame.  They have consistently been lied to.  No less an intellect than Senator Daniel Patrick Moynihan observed that “knowledge is power, and the ability to define what others take to be knowledge is the greatest power.”  The process has been elegant and mundane. It is, simply, the Cold War’s economic legacy.



[1] Demmed is the correct word.  It is a Chapter Heading in Baroness Orczy’s The Elusive Pimpernel; the 4th book in the classic adventure series about the Scarlet Pimpernel. http://en.wikipedia.org/wiki/The_Elusive_Pimpernel_(novel)

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