I, for one, welcome our new alien overlords
Paul Krugman was on CNN yesterday, as a guest on “Fareed Zakaria GPS”. I’m glad of it, because he provided us with this gem:
If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better–
I guess since the Nazis and Imperial Japan are no longer with us, an alien attack threat is all he’s got left. In one sense, he’s right. If aliens were coming to attack us, we’d do whatever we had to do, and damn the expense. Of course, the aliens, assuming they were really interested in killing us all off, would probably stop close to the asteroid belt and drop bolides on us until we said "uncle". Or were extinct. Which would solve our financial problems.
Here’s the thing about military spending. we consider a lot of military spending to be on durable goods. We count it that way as part of GDP. But these goods are NOT durable goods. They are consumables. We build them with the expectation that they will be quickly, and violently consumed in combat. And outside of combat, they generally have no useful role in society.
But let’s assume he’s right. We have a massive space armaments buildup, everyone goes back to work, and we borrow another $14 trillion to do it. Great. 18 months later, everybody is working in the armaments factories, thousands of "space fighters" and orbital x-ray lasers are buzzing around in near earth orbit, command bunkers are built deep in the earth’s crust…woo hoo! The economy is booming again.
Then we find the threat has been mistaken. There aren’t any aliens coming to attack us. Are we really better off? I mean, we’ve been better off for a couple of years, while we were preparing for the aliens, and everybody was working. But what happens now?
Now we have a huge stockpile of useless military equipment that we have to destroy, or borrow more money to maintain. Demand for plasma cannon and shield generators disappears. The armaments factories close down, and those jobs are gone forever. We have rung up a $30 trillion debt to purchase a massive amount of goods that have no constructive purpose, and generate no wealth. And what wealth we did have is now sunk into space weaponry we can’t use for…well…anything. What we can use, we have a glut of, and have to either destroy or surplus out.
So, where do all the jobs go now? How are we better off? All the alien-fighting military and civilian jobs evaporate, our national wealth has been sunk into useless alien-fighting equipment, and we’re now carrying a debt of 200% of GDP. It seems to me that we’re now worse off than we were before the alien scare.
This is Keynesianism taken to the furthest logical extreme: We’d be better off creating a massive buildup of useless and unusable military equipment, because it would stimulate the economy. The trouble is, how do we pay for it once we’ve done it?
Frankly, if the aliens do come, I’d prefer that we do nothing. If they can cross the vastness of interstellar space, their technology is so far ahead of ours that any attempt at defense would be futile. And, of course, I presume that any society so advanced would, if nothing else, deliver us from Prof. Krugman’s brand of irrational economics once and for all.