Wars increase production and employment, but this time the US is in a recession. Can we blame globilization?

BY Paul Solman  May 9, 2008 at 4:36 PM EDT

Question/Comment: Wars are inflationary, because goods are being produced in order to be destroyed. Wars increase production and employment but this time around the U.S. is at war and in a recession. Is this the result of globalization?

Paul Solman: I doubt it, except perhaps in the sense that the global economic boom (in China, especially) allowed the U.S. economy to go on a debt bender, which allowed us to “grow” faster than we really could, thus leading perhaps to a steeper fall.

The war’s effects are elusive. Did it help revive the economy after the dotcom bust of 2000 and the attacks of 2001? Did the debt we incurred in fighting it crowd out valuable investment that would have kept us growing longer?

World War II was a boon to the U.S. economy but Vietnam ended with our deepest recession (1974-75) since the ’30s. Go figure.