Paul Samuelson, winner of the 1970 Nobel Memorial Prize in Economic Sciences, speaking at Nobel Conference X: The Quest for Peace held at Gustavus Adolphus College. Samuelson's speech was titled “Economics and Peace.”
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Peace is among other things the absence of war and it is part of what passes for the conventional wisdom that is economics which supplies the cinemas of War. Napoleon no doctor philosophy and economics set an army marches on its stomach which is simply a dramatic way of saying that it takes gross national product GNP to conduct the war. Indeed some people go further and say that Wars are not really a struggle for power between princes but rather a joust between competing Pig irons that the name of the game whatever the program calls it really is plunder. In the well-made murder mystery there always comes that moment when the infallible detective says cherchez La Femme. Similarly many acute students of imperialism will counsel that one should seek to ferret out as the proximate cause for war that love which dare not reveal this name. I mean the love for money. This was an economics is at the root of all conflict is an extreme one, but all the more reason that we analyzed it carefully and without prejudice. But who is to say the nature herself does not follow extreme patterns? No, and I believe was ever refused a Nobel Prize in science because the great principal he discovered turned out to be simple. All the way require a principal is going to be correct in relation to the facts. Not that it be complicated. At the opposite poles to the simple thesis that economics is the cause of war is an equally simple antithesis economics is the means to peace. I'm referring to that attractive you of John Stuart Mill, which held that if strangers will begin to exchange goods with one another they will come to prefer the exchange of good with good to the exchange of evil for evil. Strangers who meat markets it is hoped will come to no trust and perhaps even like one another the free-trade cause was a spouse by the classical Economist of a century ago on the grounds that it would contribute to economic well-being. But also it was a spouse in the faith the free trade would promote World Peace. Well, just because of the thesis of optimistic doesn't mean that it is necessarily wrong. So I can Onyx does it cause a piece also deserves careful and objective investigation. Finally there was an important view expressed on the eve of world war connecting up economics in the peace. The outbreak of hostilities in August 1914 came as a blow to every civilized person. And when the writers and artists of London's Bohemian Bloomsbury set gave voice to their anguish, they were bucked up no end by the Assurance given to them by a young man who was to become the greatest Economist of our century. I trust you all know his name. I refer of course to John Maynard Keynes. And the message of comfort he preached was this be a good share No, Modern War can last be on Christmas. It's just become too expensive and cannot be a lasting matter. Well, by the way, if that's what a great Economist said, what do you suppose the Lesser economist? What's stranger such words may sound must sound in the light of hindsight. I seem to recall that Norman. Angel was giving a Nobel Prize for Peace in part at least four annunciating the pieces and I should warn that before we left to knowingly at the insert of tubes of the past. We recall that one of the reasons one of the reasons for the acceptance of the recent ceasefire in the Middle East was provided by The Brute fact of accounting that neither side had the reserves of material to continue the conflict at its initial intensity. Well, perhaps some day war will price itself out of the market. That too is a thesis that has to be studied and I might add don't hold your breath. Let's examine capitalism as the source or a source of imperialistic warts. And let's face up to the most single most sweeping indictment which asserts the strong thesis that the prime cause of war is capitalism. This is not a new thesis all this Century. It has been advanced in one form or another. Los early in the Edwardian. The British Economist crank under-consumption is John Hobson sought to find an explanation for foreign investment in capitalism's need to depend upon foreign markets for its continued Prosperity a little later Rosa Luxemburg from Amore Martian point of view elaborated the thesis that a closed economy a close capitalistic economy would inevitably run out of steam when it came to find vent for a surplus unless you can find new markets new third markets abroad Linen while a political Refugee in Wartime Switzerland and just prior to arriving at the Finland station to take charge of the impending Russian Revolution welded together the Marxist views of Rudolph hilferding Luxembourg. Now, there is the set forth the thesis that world war was essentially the outcome of the Monopoly banking last stage of capitalism. Would be a mistake to believe that there is one monolithic marching view of these matters. Marx himself Albert hirschman is recently discovered could have found in the writings of Hagel that goes back a long time the thesis that are closed capitalistic market system requires outside markets for its maintainable equilibrium. But apparently according to Professor hershman's researches this particular thesis is not to be found in Mark's his own writings and indeed. It's not a peculiarly martian notion that a surplus in the balance of payments is a favorable factor in promoting risk domestic economic conditions the pre Adam Smith mercantilists were if anything only to prone to fall into such beliefs and all this was centuries before the writings of Marx and Engels. If the results of research were to confirm the belief that capitalism capitalism is the prime cause of War. Would that be reason for optimism or pessimism? Those who think that the final Revolution into socialism is imminent. Would I suppose consider it to be an optimistic conclusion with one Fell Swoop. The destruction of capitalism would usher in an epic of World Peace? But are they really very many today who think that the ultimate Revolution is imminent? I rather doubt it on more than one occasion in the mid-nineteenth century. We know from the letters of Marks & Angles to each other. They did think the Communist revolutions were just around the corner often. They would discuss the timetable of the Railroad schedules and packing their bags to be in on the 1848 or the later rub. Rebellions and revolutions fight with gray hairs and hopes long deferred they came to hold a more realistic View. And actually when the October 1970 17 Revolution did happen to come to wartime Russia. The event came as something of a surprise to most Western European radicals. It was not called for in their philosophies and time tables that pre-industrial backward Russia Should Skip the stage of Bourgeois capitalism and have enjoyed if that is the correct verb or revolution first. The good book says we pass this way only once history is a one-time thing. It's not a scientific sample selected by repeatable procedure from the same statistical earn or universe. As the Greek philosophers insisted one cannot even swim twice in the same river. One swims differently at 10 then a 20. More than that no River stays the same Mark Twain's Mississippi is not your own currents. Each generation alas must learn its own lessons the hard way. When Saint Paul was a child, he did as a child. Why should that privilege be denied to last night's newly-born? This was brought home to me on an occasion when Paul Sweezy one smoke at Harvard. Paul Sweezy is one of the few marks and Economist who developed out of American academic life, but don't hasten to infer from this that Sweezy holds down a remunerative chair in American University on the contrary. He is gone for me and young radical to an old radical as a freelance writer and editor of the monthly review as close as he was ever able to come to academic tenure was an occasional stamped as a summer school teacher or visiting Professor, which I must say is a sobering reflection on the American college system. Will a colleague reported to me how the Harvard post lecture discussion ran one of the new listing new left listeners query? What I want to know is whether in your opinion, dr. Swezey the revolution will come in my lifetime. In reply Swayze was reported to have laid out the pros and the cons of the likelihood of that contingency event only to evoke the impatient for joinder. What's the good of it? If I can't look forward to a better social order in my own time? Nor was the young leftists disquiet that sways by doctor Swayze's Sage observation. Don't old men plant small trees will never bloom in their lifetimes. Well, I betray my age when I confess that in this matter. I have to side with the old against the Young. If there is a true law of conservation of violence and warfare under capitalism that is indeed a pessimistic conclusion. For as we look around the world today, we realize how tenacious is the grip of the market system. The counter-revolution in Chile against the Allende government came as no great surprise to the cynical and sophisticated political analysts their Wonder was that the non-interventionist tradition of the Chilean military establishment prevailed as long as it did. Even the Scandinavian countries with their long socialist tradition their long tradition of since consensus and witnessed in recent years something of a rebellion at the polls against the heavy taxation of the welfare state. who would have thought that a George Wallace could gain a considerable vote in Denmark and Norway and Sweden the longtime dominance of the labor parties has diminished in recent years the balance of power in Australia New Zealand similarly oscillates within narrow limits between left of center and right of Center coalition's but let us grasp the nettle. However, our hearts would feel about the remoteness of true peace under enduring capitalism. Our minds will want to know whether imperialism in Warfare are indeed Inseparable from the market system. Let's try to tally up the score. Yes generals. Do have a vested interest in Warfare. And 15 years after World War 1 there were senators from this part of the country who believe that America had been pressured into that unnecessary Conflict by the machination of the munition makers who stood to gain their blood profits from the encouragement of hostilities. This simple-minded notion would make a good shop play. In fact it once did. But every question is two sides and either side would make a good shop play. Inshallah work the other side of the street as I recall in arms and the man in which his truck with soldier soldier is too preoccupied with running hotels along good Swiss lines to indulge himself and patriotic heroism and histrionics. Today, there are no few specialized Industries which exists only for the purpose of making gunpowder. Nevertheless the military industrial complex and we owe the name to General Eisenhower of all people. Is much more suffused. The house of itnt has many mansions. I'm sorry. I wrote that down before it came up in the discussion is yesterday. But the hostilities which enrich it's pouring utilities Branch me at the same time impoverished its chain of vacation hotels. The name is Sharon, but the ownership is it auntie. The soldier who dies may be a policyholder the insurance company AT&T owns. The name is Hartford, but the ownership is it auntie. Of course some special interest game from war but also some special interest groups lose from the absence of Peace. The question must be reposed to it. Ask does the capitalist class as a whole gain or lose from war? It would be misleading to give the following answer. An easy answer German and Japanese capitalist were hurt rather than helped by World War. Of course. Nobody starts in a war. He is sure. He's going to lose we must ask for the capitalists in the country that turns out to Big Victorious stand to gain as a whole from the business of War. The answer to this question turns out to be not so simple. On the one hand one probably can think of historical cases of nice cheap Wars where the capitalist of the Victoria's country ended up with a good return on their investment. Hannity there's no reason why much or all of The Spoils of War could not also have filtered down in those countries to the non capitalist classes. Play the other hand war is almost certain to involve what we Economist technically call deadweight loss. After even the most profitable War Economist from either Nation or from the outside will almost certainly be able to show that the losers lose more than the winners win. In that sense War can't be good business in the vulgar language of the graduating class from an economic theory we say the wars are not Pareto optimal. This is to say that if rational man could foresee correctly the outcome of the war. The losers could bribe the winners. Offering them even more than they derive from successful war and with everybody I repeat everybody ending up better off from peace than four more as an aside. Let me say that I want to appear on a panel with a a sparkling journalist in Washington Peter Lissa. Go ahead of the Chicago Daily News Bureau and he had a good solution for the Vietnam War 5 billion dollars that was to bribe a to I had his group with the numbered bank accounts in Switzerland. He thought it would be very much cheaper in the end. Well such economic analysis, I think proves a little bit too much. I realize that there are Economist and perhaps even the majority of Economist a really believe that the world. In fact the ends up Pareto optimal to me. This is an incredible belief the very existence of past Wars serves as Connor examples to refute the serum by such a serum. You could prove the crime does not pay the victims of crime could always pay off the criminals more than they get than the criminals get for the practice of prime and still leave the victims better off. What crime does still occur and I do not mean only Crimes of Passion or Pareto optimal crime between sadist on the one hand and masochist on the other? Of course the Civil War across the South more than their ante-bellum slaves were worth. Of course the Civil War cost the North many times more than the sum needed to buy all the pre-war slaves out of slavery. If that could somehow have been done at a price per slave equal to Market quotations at which a limited number of slaves were actually bought and sold in the pre-war years. At in practice probably should be getting up the price against yourself as we are all consumers are learning the present the time but what is the relevance of this fact you can't I'll do it. I'm doing a war you can't fight one on paper for matches rather than for blood. Why do I say that? Maybe somebody should work on some algorithms to see whether it couldn't be done as a substitute. When the drive for Algerian Independence threat from the North African Holdings of the French colonists. There was no effective way for the Gauls France to compensate those colonists and avoid conflict even though in a come from could prove that such compensation would be far cheaper in the long run. If one tried to abort crime by payoff bribes to would-be criminals the effect would be merely to make all economic persons would be criminals kidnappers and extortionists when widowed to oneself. So to speak to simulate out Lori and charge what the traffic will bear. The sum up this aspect of the matter the economic theory of bilateral and multilateral Monopoly and a fennoy man's mathematical theory of games does not have as one of its outcomes and theorems the necessity of peace. We are left after our Excursion into economic theory with a definite possibility that some classes within a nation and indeed some Victorious Nations as a whole may sleep selfish Advantage from some Wars. And because of the human propensity to engage in wishful thinking Wishful dreaming and to exaggerate one's own prospects and prowess many nations made go to war in the illusion that they will be the fortunate winners. Parenthetically one has to point out that a nation May rationally go to war even if it expects to be the loser. I'm not thinking solely of considerations of Honor even though such considerations are crucially important. No one can improve much upon Horatio's dictum. How can man die better than facing fearful odds for the ashes of his fathers and the temples of his Gods know I'm making the prosaic arithmetic point that if it is known that a country, where was it resists The Invader even the Invader who is sure to Prevail in the end. We'll find it optimal to invade less often then if he could count on a cheap and easy operation. Well, let's talk about conditions bearing on the probability of peace. The English Skylar Richardson study the historical statistics of past major and minor Awards. It's a sorry Tale. Just as you can bet that a certain number of Minnesota telephone poles will be hit by lightning each year. Or to take a classical textbook example that a certain number of Prussian soldiers will be kicked by a mule. So Richardson found you could bet the summer on earth a conflict would break out nor have recent years brought favorable Improvement in the odds for peace. Perhaps what is fruitful is not to ask what can be done to end all wars forever. Nothing or nothing feasible, maybe the discouraging answer to that question instead one might ask what conditions will lower the odds that peace will break down. Let me pose a few hypotheses and evaluate them all too briefly. First would socialism and ensure. Peace This is no easy question. utopian socialism Everywhere by definition might and human Warfare but so might utopian capitalism or utopian anarchism. and actually the stage of transition in the world between capitalism and socialism might send up Richardson's odds against peace as rival ideologies fight for the temples of their incompatible gods the friction between China and Soviet Union remind us that even if the whole world bro, if I would leave socialist there could still be high likelihood of major war. The analysis of class which is often. So fruitful for the understanding Western societies may be no less rewarding in a communist Society. I have a colleague who uses class analysis all the time on the Soviet Union. The bureaucracy particularly under centralized planning May perform many of the roles of the bourgeoisie. And the military classes may be slow to wither away. Second hypothesis would reform capitalism or the mixed economy, which is where we live in. Was that increase or improve the odds for peace? It would be nice to be able to give a cheerfully affirmative answer to this question. For most of the world has been moving this last half-century away from raw undiluted capitalism towards a post New Deal mixed economy. To a man from the Moon I first wrote to a man from Mars. Nigeria Nigeria As I say most of the world has been moving this last half-century away from Ron diluted capitalism to a man from the Moon. Sweden and Switzerland England and Japan France and Italy Germany and Australia Germany in Australia the United States with all look very much alike and distinctly different from China the list different from India or a ram. But I'm not so sure that the answer was respect to the mixed economy and reform capitalism is altogether a reassuring one. Let me say because it was a question. I was asked last night and it's a question that I used to be asked as a single most often question election of broad was weather America's Prosperity depends upon military expenditures. I wish that were the only part of the problem to worry about because to that question one can give a very cheerful answer in the age after canes. There is no need for a mixed economy to find Public Works projects killing off people in distant places. No need to find third markets. However, true the thesis of Luxembourg may have been when William Howard Taft was napping in the white house that is not the case under the present mixed economy, but there are other aspects of the problem a little more disquieting. I the Lord created the Tower of Babel. for reason so long as every small group could be separated from every other by impenetrable barriers of language the formation of a gigantic National Power remained an impossibility. The Affiliated cantons of Switzerland aren't much of a threat to the Pakistani or even to the austrians. Similarly. Just imagine if you can a competitive system of capitalistic laissez-faire that fairy tale told by the economic textbooks and it's so to speak every person stands alone. Connected with every other human being only by the telephone lines of supply and demand if you don't know your Brokers face, how can you team up with him to beat up folks in the next County? As Cain said it is better for a man to tyrannize over his pocketbook then over his neighbor. And if the economy governs itself, no significant fraction of the GMP need to be put at the service of government. Louis XIV could not have killed off the flower of French use without a full Royal purse in the power to command dear, dear man fodder for the cannons. But now let Les a Faire breakdown in the direction of the mixed economy to curb Monopoly bureaucracies are set up to iron out the Mad vibration to the business cycle. The central bank is set up to promote employment is stabilizing government budget is involved to mitigate inequality of outcome and of opportunity redistribute of Taxation and transfers are instituted to keep out the sea dikes are built and maintained while Public Works Corps Engineers build irrigation works so far so good. None of us would wish it otherwise But alas having said this one must go on to say there is no going back to the linguistic isolation of the Tower of Babel. The Lord's experiment didn't work out. Once a meeting of the fruit of the tree of knowledge on how to run the welfare state the large nationalistic government. There is no going back to the Hobbs Jungle of laissez-faire Anarchy anarchism. I don't wish to be misunderstood. Mine is no spenglerian thesis about the decline of the West Peace as the byproduct of humanitarian social efficiency. I see the reverse of Merit in the hayekian and free manian thesis that the path to Social Security leads only into the road to serfdom and to the Holocaust of nuclear Armageddon. My final messages the piece is in our hands, but we still have to work for it. No iron law of Economics drives us into war or guarantees for us the peace. In the age after Kane's no mixed economy needs military expenditure in order to keep the boiler of monetary purchasing power stoked up. The Federal Reserve can see to it then mankind shall not be crucified on a cross of gold or devastated by a shortage of bits of green currency. Remind ourselves that the economic miracles of Japan and Germany were performed in mixed capitalism's they were denied the pleasures and burden of a vast military expenditure. And under flexible exchange rates. No modern economy needs the favorable balance is a foreign investment to preserve its full employment and prosperity in short. The ghost of Rosa Luxemburg is finally laid to rest in this age after canes. but the advanced countries do dip and economically on raw materials to be found. In other countries there lies the surviving germ of Truth in the older theories of imperialism as the present oil boycott and so-called energy crisis makes only too clear the technical and managerial knowledge in the advanced countries as well as some of their Capital could with mutual Advantage be spread abroad. Here we come back to the problem touched upon yesterday of the multinational corporation. Could this the economics affirms but the politics of nationalism also demonstrates that free scope for profit-seeking investment is anything but likely the security of Contracting in a property that we take for granted within a country experiencing chest is anything but assured when dealing with nationalism abroad and the societies likely to change their regime's in the relevant future. As a result. I think we must expect some loss of economic welfare. Also some games inequity. But this is not an economic loss that government ought to prevent by the use of power or Force. The time is past when we can send a destroyer off the shores of a recalcitrant nation that way lies a certain threat to the peace. So I conclude economics must be a good servant not a bully master. Economics may be the queen of the social sciences, but that is only to say that it must be the man servant of humanity. This is a lesson fraught with significance for the cause of peace. But it's not a lesson to be learned by Economist alone. It's lesson applies to the man of business the heads of state and the people at large who represent the civilization that men of Peace are fighting for. Thank you.