A timely reminder from a while back:
The war in the Persian Gulf could end within weeks, but what if it drags on? Many people assume that a protracted war will deepen the current recession, delaying the US recovery from late 1991 to mid-1992 and raising the peak unemployment rate from 7.5 per cent to as much as 9 per cent.
The lesson of history, however, is that wars cause booms not recessions.
Every US war in this century has been associated with rapid growth and falling unemployment.
The economic costs of war – primarily inflation – came after the peace treaties. Military conflict is awful, but it need not result in economic disaster.
Who produced this gem of politico-economic insight? Step forward … Paul Krugman, long-running prophet of wartime economic collapse. (The column ran in the Sunday Herald, February 3, 1991.) Maybe he’ll explain in a future column how things have changed in a decade.
The Dish 