Inflation, war collectivism and the politics of national security

Historian Dr. Hunt Tooley explains why the legacy of WWI can still be felt in today’s politics. Photo: U.S. National Archives

HONOLULU, October 20, 2012 – The third and final televised presidential debate on Monday will focus exclusively on national security issues, foreign policy and America at war. These concepts have become so all-consuming to the American conscience and way of life that whole elections swing on how tough or weak a candidate is perceived to be towards the world outside our borders. Even modern domestic affairs are distilled through a war mentality with politicians regularly referring to “the war on drugs” or “the war on women.” But just how did America become a nation so transfixed and spellbound by warfare?

Dr. Hunt Tooley is an expert in military history and economics.

At the free market Ludwig von Mises Institute, an upcoming seminar entitled “World War One: Crucible of the Age of Statism” will explore how the First World War “inaugurated the age of planning and the apotheosis of the total state” and proved to be a turning point for not just America but all modern civilization. I had the chance to interview Mises scholar and course instructor Dr. Hunt Tooley for a perspective on WWI and how its legacy still speaks – and warns – us today.

As a luminous historian and economist whose works have been published in The American Historical Review, The English Historical Review, Central European History, The Journal of Austrian Economics, The Independent Review and many more, Dr. Tooley’s insights into the ironically named “War to End All Wars” should be taken closely to heart as we look towards the future of American foreign policy and national security.

Danny de Gracia: Probably one of the least understood conflicts by young people under the age of 30 in America today is the First World War, especially the events which primed the powder keg for it to occur. The traditional pop culture explanation for World War I that we often hear is that the Europeans just have some kind of nasty habit of violently disagreeing with each other and are prone to fits of warfare, and that explanation is used as the intellectual justification for things like NATO, the EU and even the United Nations. However there seem to be deeper economic, corporate and political factors behind the Great War, some of which remain to this day. Could you tell us what was really behind WWI?

Dr. Hunt Tooley: I don’t think that there is any single explanation of the outbreak of WWI but as you suggest many of the standard explanations don’t hold much water.  The alliance system that textbooks used to blame for the war was largely defensive in nature and forestalled war as much as it had brought it on.

Nationalism was certainly a huge factor and in my opinion the core collectivist ethnic values in nationalism were altered in the late 1870s and 1880s to reflect a much more “biological” nationalism tinged throughout by Social Darwinism. This type of thinking certainly led to clash and conflict.  Imperialism also played a special role, as did the momentous events in and around the Ottoman Empire on the eve of the war. Then of course the flashpoint, the terrorist murder of Franz Ferdinand of Habsburg and his wife Sophie in Sarajevo.

According to Dr. Tooley, manipulation of money and wealth are among the most overlooked preludes to WWI. (Photo: U.S. National Archives)

One of the most overlooked preludes to the war was the manipulation of money and wealth that Western banks and governments learned once the colonial empires of the late nineteenth century were established.  Beginning with Egypt and Latin America in the 1880s, the West – and I include the United States – engaged in parallel activities of both conquest and the use of loans to tie down non-Western powers and experiment with departures from the regime of the gold standard.

By the decade before World War I, the great powers and their banks had learned this colonial lesson and began to apply it in their own countries.  The result was the inflationary regime, without which the war would have been impossible. It’s important to keep in mind that human beings made decisions to go to war.  The leaders of Europe and eventually the United States and other countries could have chosen otherwise.

DDG: As a political scientist, one of the things that worries me is if someone subscribes to the intellectual doctrine of late 19th century economists like Charles Conant, they’ll actually think that the biggest threat to America is excess savings and unconsumed goods. 

It seems to me that anyone who has this … irrational phobia if you will of falling profits and has the ear of people in government is going to advocate things like printing lots of cash, having tons of national boards and commissions to steer industry, seeking a massive military armaments buildup, having an expansionist military attitude to “open up markets” by force and all those things that led us to World War I. The implications for this is quite terrifying. What’s your thoughts on this?

Dr. Tooley: Oh, I agree completely.  And I see in your question that you assume a kind of parallel situation in today’s world.  The various doctrines used to justify inflation—an essentially unjust means of expropriation—are in full swing today, of course, and they are tied to the growth of government in all sectors.  Just as in 1914 and 1915 today the military adventures of the political class, supported by the theft of wealth through inflation, sacrifice other people’s lives for a range of ends.  Without the massive but generally misunderstood transfer of wealth from individuals to the government, the political class would simply be unable to project their own designs on people across the globe.

DDG: Let me share with you a quote. One of America’s highest ranking officers, General Douglas MacArthur said “It is part of the general pattern of misguided policy that our country is now geared to an arms economy which was bred in an artificially induced psychosis of war hysteria and nurtured upon an incessant propaganda of fear. While such an economy may produce a sense of seeming prosperity for the moment, it rests on an illusionary foundation of complete unreliability and renders among our political leaders almost a greater fear of peace than is their fear of war.” Would you agree with his assessment of modern war?

Dr. Tooley: MacArthur was certainly summing up a dynamic he lived through in two wars. And many other observers have made the same point: the intellectual Randolph Bourne, Marine General Smedley Butler or even strangely Dwight Eisenhower himself. 

Regardless of the [presidential] administration or the Congress, the options for dealing with foreign affairs never include the refusal to invade foreign powers, as George Washington suggested in his farewell address.  War is necessary for the modern Leviathan state, and if none exists for the moment, then interim “wars” that can stand in as the “moral equivalent of war”—in Jimmy Carter’s words—make their appearance: “war” on poverty, or for energy, or against drugs, or cigarettes and so forth.

World War I was a perfect example of the kind of psychosis which MacArthur describes.

DDG: Do you think it’s safe to say that war never helps a nation, it only destroys production and thus makes both victor and victim state alike poorer?

“We are on track for more wars as we speak.” -Dr. Hunt Tooley (Photo: U.S. Navy file photo)

Dr. Tooley: War is in essence destructive.  It destroys lives and property.  It destroys many psyches.  It destroys moral vision.  It destroys private life.  There may be temporary “productive” aspects for some small groups, such as Halliburton or the arms makers. And in the middle of the horrors of war, human beings can also amazingly find solutions to those horrors which are of permanent value, such as the invention of plastic surgery to repair wounded faces during World War I, the result of heroic and dedicated medical practitioners in several countries. But when we calculate holistically, the balance sheet of war is always in the red.

DDG: Is monetary inflation is perhaps the single biggest threat to peace between nations? And looking to our 21st century, do you think Americans should be extremely concerned that the deterioration of our economy sets us on track for more wars?

Dr. Tooley: We are on track for more wars as we speak.  One of the unstated issues behind this political campaign is which of these two very similar characters will oversee the raising of the debt ceiling. As we enable the government to have a limitless money chest not only through high taxes, but through inflationary transfers as well, the wars will come.

As you point out, this is a vicious circle.  Inflationary politics (see the history of French Revolutionary hyperinflation or the Greenbacks in the 1860s) is general connected with wars and preparations for war.  And of course, our central case under discussion here, World War I, is a prime example of this very, very close connection between inflation and war.


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Danny de Gracia

Dr. Danny de Gracia is a political scientist and a former senior adviser to the Human Services and International Affairs committees at the Hawaii State Legislature. From 2011-2013 he served as an elected municipal board member in Waipahu. As an expert in international relations theory, military policy, political psychology and economics, Danny has advised numerous policymakers and elected officials and his opinions have been featured worldwide. Now working on his first novel, Danny resides on the island of Oahu.

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