Of Markets and Militaries

When will the industries of war fall silent? While there are still wars around the globe to this day, peace slowly seems to be winning out. Yet there is scant time to ensure that it does.

The Great Illusion

One hundred years after the armistice which brought an end to the so-called “Great War”, it is difficult to credit that advanced, supposedly civilised nations had ever thought well of industrialised warfare.

However, in the run up to the war, it was widely held that war itself was a force for good in the world, promoting evolution by rewarding the strong and brave. Others in the establishment, for example H.G. Wells, thought war served as a useful corrective to working class aspirations for greater agency – in time of war, so it was felt, the social hierarchy would be validated. And indeed, the English aristocracy, by and large, did lead from the front, and suffered a disproportionally greater loss of life than other social classes as a result.

With hindsight, all participants agreed the war was a needless tragedy; but it is not as though warnings were in short supply. In 1909, Sir Norman Angell had published Europe’s Optical Illusion (and in 1910, The Great Illusion) in which he argued that the economic case for war had ceased to apply. In short, Angell argued that war on an industrial scale was both socially and economically irrational. He therefore expected that war between the European powers would be unlikely to begin, and would be of short duration if it did begin. Sadly, however, humanity seems to prefer to learn from experience rather than logic.

It takes two to make a quarrel, so it is said, but economic theory indicates wars are likely if only one side feels they have more to gain than lose from conflict. Ultimately it took World War I, the war to end all wars and World War II, which we can only hope was the nuclear war to end all nuclear wars, to demonstrate to advanced nations that even the victors of such conflict gain more from peace. Regrettably, there are still wars around the world today; but it seems that peace is slowly winning out. The scale of this turnaround in public perception cannot be overemphasised.

The Art of Economic Warfare

Still, human greed does not sleep. The battles – or rather competitions – to take control of other nations' resources are now fought largely in the economic sphere. The instrument of choice is the capital account deficit. If a nation maintains such a deficit, it means that capital is flowing out of the country; somewhere in the world, domestic capitalists are acquiring foreign assets, or driving others into debt. A capital account deficit must be matched by a current account surplus, meaning that the rest of the world is, in aggregate, consuming more of the goods produced by that nation than its own citizens. It follows that citizens of the net exporting nation are, on average, enjoying a lower standard of living than they otherwise would. Their economic sacrifices (often unacknowledged) are what allows the current account surplus to continue. Economic warfare is costly, even to the victors!

Of course, pursuit of power through the market is by no means a new phenomenon. Britain, so it was once said, gained its empire in a fit of absence of mind, or rather, through capitalism and market forces. It must be remembered though that the British were prepared to fight if that was necessary to keep markets open. The recognition of the imperial aspects of trade is what motivated nationalists from the American revolutionaries to Ghandi to boycott British goods as part of their independence struggle.¹

Is Economic Peace Possible?

As with the recourse to the use of military force, it has long been held, and still is by some, that market forces promote morality and progress. Others argue that it is the other way about; that markets depend on, but undermine, moral constructs. Economics (and experience) indicates that unscrupulous firms are likely to be more competitive – if this were not the case, we would require no regulation or laws.

However, it is not the question of whether economic warfare promotes or impedes ethics which ought to be our concern today, but rather whether the cost of economic warfare progress, now outweighs the benefits.

Beyond a certain point, further economic growth does not add to national wellbeing. Indeed, the inequality which has increased in the UK (and many other nations) alongside the four-decades long emphasis on free-markets, rather undermines wellbeing. The benefits of further market-oriented growth appear scant; the costs, however, are increasing. From climate change, to growing evidence of the negative impact of single-use plastics, the loss of biodiversity, and the impending extinction of many species. Globally, we consume more than a sustainable world can deliver.

A World Beyond “Growth”

Despite many warnings, the nations of the world refused to accept a little over a century ago that military forces, while useful, had reached the point where they impeded rather than facilitated progress, even when viewed at a nationalist level. Today we similarly refuse to accept that market forces must also be brought to heel in order to serve, not destroy, our societies, nations and environment.

Perhaps a world in which the planet is not degraded in the pointless pursuit of GDP growth seems as unlikely to us today as a world without the “progress” facilitated by war seemed to our forebears. However, it is a world we can no longer afford to do without. 

On Remembrance Day this year, we must aspire also to economic peace. It has been said “Only when the last tree has died and the last river been poisoned and the last fish been caught will we realise we cannot eat money.” Let us hope it does not take this long.

¹ Such global mastery does not last forever, whether founded on military or market forces. Britain today has become relatively deindustrialised and thus increasingly come under foreign ownership through the same means by which capitalist imperium was gained, in a fit of absence of mind, i.e., through market forces.

Dr Kevin Albertson is a Professor of Economics at Manchester Metropolitan University (MMU).

This article has also been published on the MMU website as part of the #Armistace100 commemorative campaign. It can be viewed here with full annotation, suggested reading and further expert analysis from the #Armistace100 campaign.