5/16/2011

Is Rollback the most important book of our time?

That's obviously impossible to say, but the lessons learned from it are of paramount importance to every living person on this planet.

For now I want to focus on one small subsection of Chapter 5 of the book, "Less Bang for the Buck: Pentagon Spending, the Military, and the U.S. Economy."

Specifically what I found so illuminating about this part of Dr. Thomas Woods' overall fantastic new book, Rollback, is the unseen costs of Pentagon spending, the military, and its effects on the U.S. economy as a whole.

It is common knowledge that there is a tremendous amount of waste associated with military spending. Even the most ardent supporters of big government don't contest this point, but rather say the associated inefficiencies and waste endemic to the nature of military spending are a necessary sacrifice for the greater good of a strong military. While I will not delve into combating that argument now, I do want to highlight how Dr. Woods' new book demonstrates with shocking clarity that the unseen costs of military spending are so much greater than one can even comprehend.

Drawing from the great Frederic Bastiat's essay, "What is Seen and What Is Not Seen" Woods documents the destruction of capital, productivity, and resources that stems from our current military-industrial complex. Some examples include things like: "Over a period of two years, the average U.S. motorist uses about as much fuel as does a single F-16 training jet in less than an hour."

The most disturbing cost of military spending in my view, however, is the capital consumption. Dr. Woods highlights that as a result of decades of the Pentagon routinely over-bidding on the goods it buys (the government is much less willing to shop for the best possible price and will frequently pay above market value) the cost of producer goods, such as machine making tools, have been artificially inflated. After coming to depend on the government as your primary buyer, there is much less incentive to compete on price and, consequently, the price of these capital goods are artificially inflated.

When the cost of capital rises, the productivity of the economy as a whole falters. This should be fairly straightforward to grasp, but mind numbing to truly comprehend its total effect. When the costs for new capital and improved means of production rises, entrepreneurs (whom don't have access to the taxpayer derived spigot of funds) will tend to delay or eschew purchasing new forms of capital as their budgetary needs require.

The result of this, to have an economy using decades-old infrastructure, delaying upgrading machinery to more productive models, is felt everywhere. The economy as a whole is made poorer. Innovation and new products that otherwise would have been created are never seen. The average worker sees his marginal productivity value and wages rise slower than they would have otherwise. It goes on and on.

This phenomenon makes perfect sense when you realize that by driving up the cost of capital and machine-making tool prices, production everywhere, not just in military, is going to see its cost rise. The trickle down effect that is a result of this is truly incalculable.

I've long known that government and the military in specific is a giant parasite on productive wealth, I've never before truly grasped the magnitude of the unseen costs as well though. Rollback peels back the curtain to expose this, and many other aspects of government that leaves the reader feeling dazed and left to ponder what riches we might have uncovered if this enormous cost was not forced upon the taxpayer and our society as a whole.

For more information and even to be able to read Chapter 1 for free, please visit: http://www.tomwoods.com/books/rollback/

3 comments:

  1. Economics 101 Broken Window Fallacy at its finest

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  2. Certainly there is waste in military spending, but it is no more endemic than the any other government operation.

    Public education at the national level is just as destructive.

    TSA with its million dollar nude X-ray machines and its complete erosion of individual liberty comes to mind.

    What about congress itself, federalizing all sorts of crimes with which it will soon be able to prosecute and intern any of us for these new violations.

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