Protracted Wars and Asset Attrition

Much earlier, I've written about the use of war spending as a quick-and-dirty means to apply a consumptive forcing function in an economic cycle. (On the issue of economic time scales and the dynamics involved, I have also written an earlier note.)

When aggressive wars are waged with the purpose of acquiring resources (geopolitical bases, currency values, people, mines, energy resources, transportation resources, land, etc.), besides the moral bankruptcy of such a behaviour, the utilitarian calculation that takes the aggressor into war also stems from the "positive" consumptive impact on its economy. The "positive" nature of the impact shows up in the hope of the application and execution of war in a short time scale in order to solve a specific problem in a specific economic cycle. The impact of war spending on the cycle will always prove more dramatic than any long-term investment, whose impact will be faced and felt in a term longer than of interest to the executioners of "national interest."

However, matters of war and peace, and life and death, have always proved to be more complex than what simple utilitarian calculations tend to reveal.

Despites rosy predictions and enthusiastic promises pundits of the war party give, the aggressive war itself drags on when it faces resistance, which it often does. Note that historians have found it odd and unusual when an aggressive war has encountered no resistance. While the planners of aggression always do what they can to dismantle resistance, the aggressor should always bet on encountering resistance to its aggression. (Even little Melos resisted the Athenian armada.) Occasionally, the aggressor perpetrates extreme violence in order to prove resistance futile. As a consequence, those who resist fold temporarily but only as a means to survive for a better day.

So, as a historical experience, all aggressive wars in history have bred resistance in various forms, scales and stages. Often the aggressor is quite well-versed in history and knows this fact of history full well. So, the aggressor takes care only to attack those who cannot be expected to defend themselves or only targets which have been "softened" through years of brutal but calculated preparation. Of course, not always do such preparations and campaigns succeed. History is littered with their failures more than with their successes. However, the successes occur with enough frequency to salivate the aggressor's appetite.

With the stretching of the war beyond expected scope, larger chunks of hard-to-renew resources continue to be wasted on it. Even as such wasteful spending may be advocated to drive further consumption, in reality, it generates no added value to supplement existing asset values. Hence, a general asset attrition sets in, and by extension, inflation takes hold, and soft and hard landings beset various asset-based sectors of the economy. Note that all sectors of the economy ultimately prove to be asset-based if we are daring enough to include, also, non-physical assets in our utilitarian calculations. We can think of various types of assets -- for example, national currency value (determining the value of various forms of savings and investments), stock values, real-estate values, expertise, know-how, skills and knowledge -- these are all assets, the latter few examples of which, by themselves, are non-physical assets even if they may have physical representations. Note that the most important assets are the human beings. This makes a mockery of aggressive war as one waged "for the hearts and minds" of the targets of aggression.

As war drags on, a grinding attrition grips all national assets. Resources that should have been invested to improve such assets are wasted, and the negative long-term economic impact draws itself near. (I refer the reader to a note elsewhere which extracts one of Nobel Prize economist Joseph Stiglitz' relevant observations on the cost of war.)

In conclusion, we should note that asset attrition has a multiplicative effect at a macroeconomic level. The value of assets deployed in a value network depend on the value of other asssets. So, as a particular group of assets lose value due to a lack of proper and long-term investment, they depress value of other, related assets.

Comments:

Masood, Excellent post!!! I would hope many people would read this. Ralph

Posted by Ralph Hannon on March 03, 2007 at 05:54 AM PST #

Ralph - Thank you for your encouraging comment. I thought of writing this piece as I was driving home late last night in the Silicon Valley. In this entry, I have not quite worked out all the details of what I wanted to say and have not drawn all the logical conclusions. In other words, quite a number of valuable ideas, whether implicit or merely mentioned, remain for exploration by others who may find better time and attention to devote to them.

Posted by M. Mortazavi on March 03, 2007 at 03:17 PM PST #

Is there a method to determine the cost of inaction? For instance, had Hitler been stopped earlier, the cost to other countries of the war would have been far less.

Posted by Patrick Giagnocavo on March 04, 2007 at 12:02 PM PST #

Because its consequences (i.e. resistance) are more definite, cost of aggression can be far better calculated than the cost of "inaction," whatever it is that the vague concept of "inaction" actually means.

In fact, the imaginary cost of "inaction" (i.e. of not going to war or of not attacking another country) has only been used to justify aggression. I know of no other uses of it in modern times.

Certainly, the utilitarian calculations involving "inaction" (i.e. not going to war) cannot have any significance when it comes to defense, unless we are allowed to use "action" to mean bolstering defenses agaist a potential aggression.

In short, I think the "inaction" argument is over-blown and for rhetorical purposes. It is used to wage aggressive, "pre-emptive" wars. In fact, the argument was used by Hitler, himself, to attack others. The cost of "inaction," he argued, was too high.

Now, let's look at it the other way. With Hitler, the U.S. would not have gone into a war any earlier. In other words, it was willing to be quite inactive. It only engaged, when it was quite clear that Hitler would be defeated in the Eastern fronts by the Red Army and the Russians, who were giving heavy casulties -- some 20 million people by some accounts, I think

There was never inaction w.r.t. Hilter, as far as I know. There was only cold calculation. The U.S. relationship with Germany continued well into Hitler's regime.

Furthermore, Hitler's was clearly an aggressor state, i.e. it had attacked and occupied others' land through war and destruction. Again, notice the number of Russian's killed. Hitler used the concept of the cost of "inaction" to wage aggressive wars. Whoever uses this concept now, will immediately step into Hitler's footsteps and will most probably face resistance that will lead to consequences similar to the one handed to Hitler's regime.

In other words, the age of expansion by aggressive war, whatever the excuse -- including the excuse summarized as "the cost of inaction" -- has come to a close in the modern age, in which we live.

Posted by M. Mortazavi on March 04, 2007 at 04:43 PM PST #

I was listening to Ted Koppel on NPR (3/6/07) discuss his book: "Our Children's Children's War"...all about the foregone conclusion in certain quarters that the current "war" is also going to be a long-drawn out war...a "protracted" struggle...

Posted by Umang Kumar on March 08, 2007 at 04:13 AM PST #

Excellent post, Masood. Just to pick up on the thread of 'inaction'... there was of course a good deal of inaction (in various forms) in the period over the course of the 30s, both before and after Germany initiated military action. I suspect what Patrick may be getting at is the idea of the relative costs of

(i) inaction - either appeasement or non-aggression;

(ii) overwhelming retaliation - after all, the doctrine of Mutually Assured Destruction was based on the premise that there would be no war of attrition, just an immediate and devastating response.

Posted by Robin Wilton on March 08, 2007 at 07:38 PM PST #

I would say the trade off is beween aggression and defense. I would say it is quite clear, when it comes to war among nations, which is which.

I think one can credibly argue that trade off between aggression and defense always favors defense.

Posted by M. Mortazavi on March 09, 2007 at 02:01 AM PST #

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