Last Sunday’s New York Times published an interesting article about U.S. military bases in Iraq that carries valuable lessons for America with respect to military spending, governmental dependency, and national bankruptcy.
The article, entitled “As U.S. Leaves, Iraqis Suffer Economic Toll,” explains the travails of Iraqis who are suffering economic losses due to the closing of U.S. military bases in Iraq. Qahtan Kareem, for example, is “grim about the future of his company and its 430 employees” The company buys and sells “scrap and surplus from military bases.” The pattern is repeating itself in those areas of Iraq where the U.S. military is shutting down.
What would mainstream Iraqi economists say? They’d say the same thing that mainstream American economists would say about U.S. military bases here in the United States: Keep the bases open because that they’re a key to the wealth and prosperity of a nation.
Actually, however, it’s the exact opposite. Military spending, like any other federal spending, contributes to the impoverishment, dependency, and maybe even the bankruptcy of a nation.
Let’s begin with a hypothetical situation in which Americans keep everything they earn — that is, no income taxation (which in fact was the situation for Americans for some 125 years). Each family would be deciding how best to allocate its income, in terms of what the family is buying, saving, investing, and donating. Businesses would naturally respond to market signals on what to produce and in what quantities, all in response to how people are disposing of 100 percent of their income.
One day, the federal government imposes a 10 percent income tax on everyone. On that day, everyone automatically loses 10 percent of his income. People readjust their choices in terms of what they’re going to do with the remaining 90 percent of their income. Inevitably, some businesses downsize or even go out of business owing to the 10 percent that people no longer are disposing of.
It’s different with the government, however. It now has gobs of new money from the 10 percent income tax that is now being collected from millions of people. It gives the money to the Pentagon, with instructions to build a string of military bases across America.
The Pentagon begins building the bases, and people immediately notice something: The Pentagon is spending money to hire people to build the base facilities and then to operate them. Once the base is finished, the Pentagon transfers thousands of soldiers, who used to be hired in the private sector but who decided to go work for the government, to the new military bases.
People in the community are ecstatic. “Jobs for our community!” the mainstream editorial writers exclaim! Dozens of businesses establishments, especially bars, strip joints, and liquor stores, open up around the bases, causing the mainstream editorial writers to exclaim, “The military is the key to our prosperity!”
After many years, libertarians point out that the bases are stupid, given that there is no possibility that the United States will ever be invaded by some foreign power and the fact that bankruptcy is looming on the horizon due to excessive federal spending. Libertarians call for a closure of the bases, a discharge of the soldiers back into the private sector, and the abolition of the 10 percent income tax.
What would be the response of American statists, especially those near the military bases? They would be hopping mad, exclaiming, “Closing the bases will cost us jobs and prosperity!”
What the statists fail to recognize, however, is that the bases are actually an enormous burden on jobs and prosperity. By closing them, there would actually be a doubly positive economic effect. Everyone in the private sector would now have the 10 percent that was being taken from him, enabling people in the private sector, rather than the Pentagon, to determine how that 10 percent is going to be spent, invested, etc. That would bring into existence new business activity or an expansion of current business activity, thereby providing new employment and prosperity to those who formerly worked in the bars, strip joints, and liquor stores that surrounded the military base.
Equally important, the soldiers would now be back in the private sector rather than the public sector. That means that instead of operating as a burden on the taxpayers, they would now be back in the productive sector of the economy.
All of us have been born and raised under a national-security warfare state, which includes thousands of military bases strung all across the nation. Everyone is taught from the first grade on up that all these bases are an inherent and necessary part of American life and America’s “free-enterprise system.” Communities that have military bases have developed a deep sense of dependency on such bases, both economically and psychologically — as deep, in fact, as the dependency that many Americans have on welfare-state programs.
Like welfare spending, military spending distorts and perverts the natural economic order, inculcates a mindset of dependency among the citizenry, and contributes to the impoverishment and possibly even bankruptcy of a nation.
Closing U.S. military bases in Iraq would be the best thing that could ever happen to the Iraqi people. The same holds true for the American people.