What if War is the Point? Part 1: On Growth


Someone who is not me reading Piketty. You should too!

I awoke this morning to an article from that liberal rag CNBC, which indicated that the price of oil is bracketed in a narrow range because of the ability for U.S. shale producers to ramp up production in short order that will more than offset any cuts made by OPEC. This echoes what I said in this column almost two years ago.

Highlighting the accuracy of my predictions is not some avenue to recognition – rather, I hope it lends credibility to the arguments I make today. I am not always right, but I have always carefully considered the positions I take.

Today, let’s talk about growth. Growth is the fuel that keeps American capitalism growing… or at least it has been since the end of the Depression. Recently, however, the engine of American capitalism has sputtered as growth trends ever closer to zero – especially when accounting for the (also negligible) influence of inflation.

Growth can take two forms: organic or artificial. Organic growth is what happens when some new innovation comes along that causes market shifts or leaps in productivity. Think Eli Whitney and the cotton gin, Thomas Newcomen and the steam engine – or even Steve Jobs and the iPhone. Organic growth can affect and industry or an entire ecomony.

Artificial growth, on the other hand, is almost purely the product of market interventions of some type. Think, for example, how the Colt arms company was benefitted by the outbreak of the Civil War. Nobody needed a pesky revolver – that is until officers needed to kill people en masse.

Which leads to the second point… The greatest basis for artificial growth is war (at least for the winning side). In America’s Civil War, for example, the northern states had to ramp up all facets of the economy in order to meet the threat posed by secession. In the South, cotton farmers and ship builders played catch-up to meet their own demand increases. World War II, while a disaster for Japan and continental Europe in the short term, was a boon for American industry… and a boon to those countries in the long term.

This brings us to Thomas Piketty. Who??? A French economist, and author of the single most compelling book explaining the world as we find it today. Seriously, go read it if you dare… its an economics text, so let’s just say that it is not always a page-turner (sorry Dr. Piketty – as if you read my column).

Piketty argues, with three centuries of supporting evidence, that the natural rate of growth (read: organic growth) over the long-run is near zero. What we have seen over the last thirty years is not some stagnation of the major economies of the world, rather it is a return to normal.

In the next part, I will argue why Piketty’s theory may be important to understand why a war may be an attractive option to the administration. I will close by saying that Piketty is a very influential character in Washington circles.

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One Response to What if War is the Point? Part 1: On Growth

  1. Pingback: What if War is the Point? Part 3: War as Economic Growth Hormone | The Wolf Camp

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