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.” Continue reading