A common presupposition about the relationship between economy and war is that war stimulates the economy. The economic situation in America during World War II shows us that this is not the case.
During WWII, 40% of the labor force was employed by the army, producing weapons, machinery, etc…. The remaining 60% was left to make up for the lost production of consumer goods* by the 40%, on top of what it already had to produce. If it didn’t do this the standard of living would go down. This is not a healthy, booming economy.
An argument that is used to say the economy improved during WWII is that the rates of unemployment fell. The reason for this is that the unemployed were now employed by the army or drafted into the army. Therefore, there were no more unemployed people.
War does not make the economy better. In reality it reduces jobs, productivity and therefore the standard of living of a country.
*e.g. milk, socks, toothbrushes, TV’s, cars. Not producer goods, which are machinery used to produce cars, factories, etc….
In the world today it is common for a successful and wealthy country to give foreign aid to struggling countries. The reasoning behind this is that foreign aid helps those countries to improve. The common example to back this up is the Marshall Plan—a post-World War II foreign aid program given by the U.S.A. to the Western European countries devastated by the war. After this plan was put into effect, most of the countries were better off.
However, this doesn’t mean that it was the foreign aid that made the difference. For one thing, any country that is devastated by war is going to improve once war is ended because it now has a chance to naturally recover. Secondly, in the WWII case, some countries were already recovering before the foreign aid was received. Also, Britain received twice as much as West Germany, but the latter was better off.
So, what is responsible for a countries development and improvement if not foreign aid? Some say that it is the free market and less or no government intervention. When there is no foreign aid, the need for a reform arises. However, if you have suffocating regulations, whether or not you have a chance to reform, you cannot due to a controlling government.
Therefore, in order to improve and develop a country, the introduction, or return to, the free market and a free economy is the solution, not foreign aid.
Does the government have to intervene in order to improve the standard of living? Not necessarily, because the free market can also raise it.
Without capital goods (the equipment that makes production possible, such as backhoes, sewing machines, machines for the transportation of products, etc…) the standard of living falls because we cannot produce enough to keep people all having the same amount of daily living products as before.
How can we raise the standard of living without government intervention?
We would need more consumer goods. For this we need more capital goods to make production faster and more efficient—therefore producing more. To gain capital goods, we need more savings and investments, which come from business men in the free market being able to operate without interference.
This is how the free market can improve the standard of living.
Is the redistribution of wealth valid or not?
As stated by libertarians and classical liberals like John Locke you have several natural rights, among them property rights. Locke stated that if you “mix your labor” with something it becomes your property. Therefore, the wealth that you get from your labor is also yours and nobody can take it from you.
The redistribution of wealth occurs when the government takes taxes and redistributes the money so that everyone has equal amounts. A common form of this is welfare. All people, whether they are rich or poor, have worked hard to gain their wealth. Therefore, it is not valid that it be taken away from them and redistributed.
Negative and positive rights are not bad and good rights. A negative right is a right that does not require anything from anybody. For example: the right to life or the right not to be killed. A positive right is a right that does require something from somebody else. For example: the right to have a car. Nobody has to do anything for someone to have the right to life, but somebody must do something for another person in order to get the car.
Classical liberals, such as John Locke, referred to natural rights–negative rights. Negative/natural rights are there from birth and everybody possesses them and can exercise them whenever they wish (even if this is at the same time as somebody else, because they do not interfere with another’s rights). However, positive rights cannot be exercised at the same time because they require coercion: somebody must force the other to do something.
Therefore, classical liberals conclude that positive rights aren’t real rights, because they weren’t there from the beginning and they cannot be exercised without anybody else’s interference.