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Explore the catastrophic effects of war on liberty through economic and governance analysis, from funding mechanisms to government suppression tactics. Learn about the ratchet effect, European geopolitics in 1914, and the growth of central banks during WWI and WWII. Delve into the data on government purchases, GDP, employment, and more to understand the intricate relationship between war, finance, and freedom.
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The Catastrophic Impact of War on Liberty Robert Higgs
To Get Resources for War • (1) Accept donations (e.g., enlistments of soldiers) Not many come forth. => ? • (2) Make purchases using enhanced revenues Raise taxes + new taxes tax avoidance & evasion Increase borrowing interest rates bid up Fed accommodation, interest-rate controls, & capital-market controls Gov’t purchases price increases threaten mobilization rig market with price controls, priorities, allocations, etc. compliance problems (3) Demand transfers (e.g., labor draft, land seizures) • draft avoidance and evasion
Government Suppresses Resistance • (1) restrictions on rights of assembly, speech, press, petition for redress of grievances • (2) propaganda • (3) enlargement of police apparatus; more surveillance, arrests, prosecutions, & deportations • (3) encouragement of informants • (4) gov’t secrecy, censorship, show trials
Ratchet Effect • Fiscal Expenditure, taxation, debt (2) Institutional Laws, organizations, precedents (3) Ideological => Growth of government from elevated trajectory
All numbers in billions of current dollars except for GDP deflator* 1996=100
How Central Banks Fund WarThe Growth of the Fed Balance Sheet During WWI Assets (billions) Source: John Paul Konig, Financial Graph & Art
Gross National Product, Government Purchases, and Gross Private Product, 1913-26 Source: Kendrick 1961; Numbers in billions of current and 1929 dollars
Employment, Unemployment and Labor Force, 1940-1948 Source: U.S. Department of Defense, 1987; millions of persons at mid-year
Hours worked in the US, 1929-1950 Source: John W. Kendrick, 1961; Billions of hours
Total Civilian Hours Worked 1939-1950 Source: Higgs, 1999; index numbers calculated from data in Kendrick 1961; 1939=100
Real GDP 1929-1950 Source: Robert Higgs, 1999
Federal Receipts, Outlays, Surplus (fiscal years), Federal Debt and Money Stock (mid-year), and GDP Deflator, 1940-1948(billions of current dollars, except deflator) Source: U.S. Office of Management and Budget 2002U.S.; Bureau of the Census 1975; Friedman and Schwartz 1963; Johnson and Williamson 2002