posted 03-18-2003 04:55 PM PT (US)
[I posted this as a response on another board and I wanted to save it for copy/paste opportunities in the future.]
Cutting Military Spending Only Helps An Economy
John collects nine gallons of rainwater per day.
Amy is excellent at purifying rainwater, which makes it much more palatable and healthy; she is able to purifiy three gallons per day.
Carl grows carrots; he is able to raise three bundles of carrots per day. But each bundle of carrots requires two gallons of rainwater to produce.
John, Carl, and Amy can survive on a bit less food, but to really not feel hungry they each need to eat one bundle of carrots per day. Also, their minimum requirement of purified drinking water is one gallon per person per day.
John, Carl, and Amy have formed a nice robust economy. Every day, John trades three gallons of his unpurified water for a single gallon of purified water from Amy - so now John has something to drink. Amy then purifies her remaining two gallons, keeps one for herself, then trades the other to Carl for a bundle of carrots; she now has something to eat. But Carl still needs six gallons of unpurified water per day in order to produce three bundles of carrots, so every day he trades a bundle of carrots to John in exchange for six gallons of unpurfied water. They live in mutual benefit, each working up to their limit to create VALUE, i.e., wealth, for their economy.
It's important to notice that they are not using money (yet). Money, that is: currency, those little pieces of paper in your wallet, are nothing more and nothing less than promissary notes from others for their labor and industry, which they give you in exchange for the labor and industry that you provide for them. That's true in any legitimate Money 101-105, 201-210, all the way up through Money 901-933. There's nothing else to money which can circumvent or contradict this basic principle.
All of ANY economy is simply a more complex version of this example made more complex as a result of additional people and additional industries within the economy. There's nothing more to it.
Now, back to our economy. Carl, Amy, and John's Daily Production (DP) is: nine gallons of rainwater, three bundles of carrots, and three gallons of purified water.
In the final analysis, however, all of that boils down to each of them performing their tasks in exchange for the pleasure of being able to eat one bundle of carrots and drink one gallon of purified water per day. Their Effective Daily Wealth (EDW) is, therefore, the pleasure of being able to eat one bundle of carrots and drink one gallon of purified water each per day. So far, they have no savings accounts and thus no accumulation of wealth. They're spending all that they make and no person is any more rich than anyone else (each person trades away exactly two thirds of his production per day to the others, and each gets exactly one gallon of purified water and one bundle of carrots to consume per day in exchange for their efforts).
One day their economy is attacked by a man from a neighboring economy named Soddheim. Soddheim figured out that he could pick up a large stick and use it as a weapon against Carl and could steal some of Carl's carrots - one bundle per day.
Now what's happened? Carl, John, and Amy's economy has been affected. Their effective DP has been decreased by one bundle of carrots per day. Carl can no longer keep a bundle of carrots for himself and pay John and Amy each a bundle of carrots too. Clearly, Carl must raise his prices. Now, in exchange for merely 2/3rds bundle of carrots per day to each of them, Carl requires the six gallons of unpurified water from John and one gallon of purified water from Amy. This allows him to keep only 2/3rds bundle for himself as well. All of them are still equally wealthy, but their individual wealth has been decreased by 1/3rd bundle of carrots per day ('cause Soddheim is stealing a bundle per day).
John and Amy are naturally annoyed, and they demand to know why, so Carl informs them about Soddheim. They're all annoyed about this and John comes up with a plan: John, who's a big brute and pretty handy with a stick himself, will patrol their village every day around the time that Soddheim tends to come around and prevent the theft from occurring. Unfortunately, this will cause John's production to decrease from six gallons of water per day to five gallons of water per day, but that's only half of the hit to their economy that losing a bundle of carrots would be.
So, that's what they do. The bottom line is that Carl now only has five gallons of rainwater per day to grow carrots, so he's able to produce 2.5 bundles per day, but they're getting something extra from John: Military Protection.
But are they really getting something extra? All of them are exerting the very same amount of effort that they were before, but now they've only got 2.5 bundles of carrots per day to split between them. They're poorer than they were before.
One day while on a pleasure hike, Amy sees Soddheim fall off of a cliff and die (pleasure hike indeed!). She returns to her town and informs Carl and John about what has happenend. Hooray! They no longer require John's military service; they can cut military spending - and, as a result...
...THEIR ECONOMY IMPROVES...
...to the tune of 1/2 bundle of carrots per day. John, Amy, and Carl again enjoy a full bundle of carrots per day in exchange for their labor.
So anytime you hear someone say something about the economy suffering as a result of military spending cuts, you now know that the person who came to that conclusion is WRONG, regardless of who they are, and regardless of their title, and regardless of the person's personal history. They haven't thought it through, they don't understand, they're just parroting what they hear from other pseudo-authorities. But YOU know the truth.