Paul Krugman Conquers the Martians

Paul Krugman recently argued that “Conquest Is for Losers” (New York Times, December 21) like Vladimir Putin: “You can’t treat a modern society the way ancient Rome treated a conquered province without destroying the very wealth you’re trying to seize. And meanwhile, war or the threat of war, by disrupting trade and financial connections, inflicts large costs over and above the direct expense of maintaining and deploying armies. War makes you poorer and weaker, even if you win.”

When aggressors profit in today’s world, they “invariably do so in places where exploitable raw materials are the only real source of wealth,” fueled by looting of lucrative portable goods like diamonds and ivory. But the interconnected, intangible wealth of modern finance cannot be plundered that way. Putin’s invasion of Crimea was an easy win militarily, but promptly became an economic liability, compounded by the cutoff of Russia’s economy from global financial support.

This excellent summary of the benefits of economic cooperation, with division of labor and heterogeneity of wealth, is welcome from the economist who wrote on September 14, 2001 that “the terror attack — like the original day of infamy, which brought an end to the Great Depression — could even do some economic good” since “the destruction isn’t big compared with the economy, but rebuilding will generate at least some increase in business spending;” and stated on CNN that “if we discovered that space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months.” (He has since said that he “joked” in the latter case, but the 9/11 version isn’t quite as funny.)

Neoconservatives, Krugman notes, unabashedly appreciate Putin’s methods as blunter versions of their own (while ignoring their military Keynesianism). Such parallels are inevitable in state economies. Other alphabet-soup agencies may be softer than the KGB, but its “violence and threats of violence, supplemented with bribery and corruption” remain their only source of wealth. Another column with the same thesis (“Why We Fight,” August 18) notes “it’s very hard to extract golden eggs from sophisticated economies without killing the goose in the process.” These shifts toward heterogeneity and decentralization, aided by such nascent possibilities as cryptocurrency, make it ever harder to loot wealth and also harder to tax it.

The twentieth-century Keynesian state was built on an industrial economic base tied to large-scale raw inputs, including the oil Krugman aptly points out as an unspoken rationale for ISIS. In a final irony, nobody was more prescient on the need to transcend the fossil-fuel economy than that stalwart of the libertarian movement which is often dismissed as a front for Big Oil, Karl Hess. In the 1980 Academy Award-winning documentary Karl Hess: Toward Liberty, he observed: “Solar energy has a very broad implication. It falls over the entire earth. It’s very decentralized. If energy can be picked up from any point on the Earth, it suggests to you that you don’t need central mechanisms; that you can produce important things at a local level.” Thus “the Sun says ‘freedom.’ ” And so does the liberated economy it would fuel.

Anarchy and Democracy
Fighting Fascism
Markets Not Capitalism
The Anatomy of Escape
Organization Theory