Why Everyone Should Study Economics

The more I study, the more I am convinced that the one of the most important things for people to understand is money and economics.  I say this because it’s not only the cause of prosperity, but also that of wars and conflict.  Today I’ve been studying history and came across this (talking about World War II):

“Economics conditions were a third important cause of the outbreak of the war.  The huge reparations imposed upon the Germans, and the French occupation of much of Germany’s industrial heartland, helped, as we have seen, to retard Germany’s economic recovery and bring on the debilitating inflation of the 1920s.  The depression of the 1930s contributed to the coming of the war in several ways.  It intensified economic nationalism.  Baffled by problems of unemployment and business stagnation, governments resorted to high tariffs in an attempt to preserve the home market for their own producers.  The depression was also responsible for a marked increase in armaments production, which was seen as a means of reducing unemployment.  Despite the misgivings of some within the governments of Britain and France, Germany was allowed to rearm.  Armaments expansion, on a large scale, was first undertaken by Germany about 1935, with the result that unemployment was substantially reduced and business boomed.  Other nations followed the German example, not simply as a way of boosting their economies, but in response to Nazi military power.  The depression helped as well to produce a new wave of militant expansionism directed toward the conquest of neighboring territories as a means of solving economic problems.  Japan took the lead in 1931 with the invasion of Manchuria.  The decline of Japanese exports of raw silk and cotton cloth meant that the nation as a consequence was unable to pay for needed imports of coal, iron, and other minerals.  Japanese militarists were thus furnished with a convenient pretext for seizing Manchuria, where supplies of these commodities could then be purchased for Japanese currency.  Mussolini, in part to distract the Italians from the domestic problems brought on by economic depression, invaded and annexed Ethiopia in 1936.  Finally, the depression was primarily responsible for the triumph of Nazism, whose expansionist policies contributed directly to the outbreak of the war.”

Just look at that.  It’s glaring.  Economics is the key to understanding so much about life.  It’s not just about investing and earning money.  It literally runs the major events of history!

First off you see that if some system is imposed on people which is completely unfair, leaving people oppressed, you always get wars.   The indemnities imposed on Germany brought us Hitler and the Nazis.   When the good ol’ boys started carving up the nations after World War I, splitting up the “spoils”, that too got half the world pissed off.

Then we have international trade.  Nations start to trade with one another but then one of them starts to win, and domestic businesses start to go under, losing to their international competitors.  This then leads to unemployment and lost jobs, and when people lose their jobs and have no money to buy groceries and pay their bills, they get angry.  Tariff walls are thrown up, hoping to protect domestic businesses from foreigners to keep jobs alive.  But this causes big international corporations to lose substantial profits, and they start complaining to their leaders, “What are you going to do about it?”   International tensions build.

Then there’s the business trade cycle.  To this day, much of the business cycle remains a mystery.  But as we all know, it has its cycles, sometimes giving prosperity, and then other times dipping down leading to unemployment.   Then the Keynesian economists start telling governments to spend on war munitions in order to boost the economy.  Nations throughout the past century have followed this sort of advice and what do we get?  Let’s look at Nazi Germany.  Watch as the production of military armaments leads to a spiral of destruction.

The Germans were blamed for all the problems of World War I, and had to pay for all the damages sending their economy into a tailspin.  Huge taxes were imposed on the people and that money was shipped off to the victors of the first World War, to pay for damages.

So their people are broke and don’t know how they’re going to make it.  The high taxes run off businessmen who find it more profitable to do business elsewhere.  This leads to increasing unemployment and the government doesn’t know what to do.  Prior to the first World War they were the pride of the world.  They were on top of their game, leaders in science, politics, and philosophy.  Now those same people  find themselves incapable of even buying groceries to get them through the week.

Naturally everyone’s angry.  The people know they’re better than where they’re finding themselves, and they’d had enough.  The people press their leaders to do something.  But what could possibly be done in such a situation?  They’re already broke because of the high war indemnities imposed on them.  This leaves only one option.  They begin printing money and giving it out to people in the form of unemployment insurance.   It’s very unfortunate, but you can’t do things like this without serious economically destructive ramifications.  Next thing you know they’re rolling wheel-barrels of currency to buy a loaf of bread.  And the more money they print, the less incentive businessmen have to stay because their profits and savings are being destroyed, so unemployment only gets worse.

This unfair and unjust weight on Germany led the people to accept a radical leader like Hitler, who promised change.   Then they start producing tons of military armaments to get their economy out of their recession, and this scares all the other nations so they too start cranking out weapons.   And then the tension builds, everyone watching everyone else.  Everyone’s nervous.

With a stockpile of tanks, missiles, and other weapons, the greed sets in.  This happens by necessity.  Politicians tend to be greedy opportunists.  After all, why would someone like Mayor Bloomberg spend millions of dollars of his own personal money on his political campaign just to be a city mayor, if there wasn’t all sorts of inside deals being made making it worth his while?

Big business starts talking to these greedy opportunist politicians and the weapons are put to terrible use.  Countries start invading their neighbors to take their stuff.  Off goes Mussolini to take Ethiopia,  Japan takes Manchuria, and on and on.  The people go along with Mussolini because they too were in a depression.  Japan’s reasons were also economic.  They needed supplies.

Kaboom!  The whole world’s at war!  Everyone trying to protect their interests and take someone else’s stuff.

This isn’t a game.  I can’t stand that economic theory, saying you can boost your economy by government spending on military munitions.  Yeah, when a recession kicks in just go and start stockpiling tanks and building bombs.  See where it takes us!  Convert all your factories over and start making missiles and machine guns.  Even if it does help alleviate unemployment (and I don’t think it really does), look at what it leads to!   We can’t live like this.  We can’t.

Several months ago I was talking to a friend of mine from Scotland, and I was saying that we need a one world government.  He told me he wouldn’t want such a thing, unless it was his government running the show.   He’s like most people.  Nationalists.  Everyone’s attached to whatever nation they live in, unable to grasp these problems.

These cycles will continue to exist and will never be eradicated without a one world government.  International competitors will beat out domestic companies, leading to lost jobs and unemployment.  Nations will continue to have their individual armies, pointing their guns at one another.  Complex trade wars with tariffs and currency manipulation will continue to go on.

I could talk all day about how important economics is.

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3 Responses to Why Everyone Should Study Economics

  1. Pingback: Why Everyone Should Study Economics

  2. Timothy Fairman says:

    I would agree with the world government issue; however, people are just to stupid and nationalistic to accept it. Are we not all one people, humans? It won’t work. George Orwell is a great source for some material on the subject. In 1984 he showed the horrors of a totalitarian world government, and you know that power corrupts. One world government could lead to “2084.” I wish there was an answer, but there really isn’t. There really isn’t. One of the points of 1984 is that there is no Utopia. Sorry Thomas Moore. Animal Farm showed us that replacing government is hard, and power leads to corruption and hypocrisy. “All animals are equal, but some animals are more equal than others.” I like the idea of a world government, but event if it somehow does come into power; we all know that power corrupts. Maybe I’m wrong. Maybe people can work together. Maybe there is Utopia. Maybe.

  3. Great comment Tim. I couldn’t have said it better. It’s depressing to see the answer, yet know that it probably will never happen. To move toward a world where humanity views itself as one, and sees beyond petty differences will take time. I too am concerned that if a one world government was put in place, if that government became corrupt how could you escape it? Combine this with all the new technological gizmos coming out … it’s all very scary. Just the other day I heard that all new cars these days come with “blackboxes” which record your driving behavior. Most everyone also carries GPS enabled phones which can track their every move. Phone calls can all be listened in on, and with the Patriot Act the government can listen in without a warrant. Everything we do online is monitored and logged by Internet Service Providers and can be sent to the government upon request. Google is saving our search logs. All of our credit card activity, banking activity, and all finances are being sifted through by the IRS to make sure we’re not lying on tax returns, but who knows what else they may be logging and keeping tracking of. I think we as a society have to think VERY carefully about all this new stuff and how it relates to our civil liberties.

    The world found in 1984 could find itself a reality if we’re not careful. I remember in that book every room had a big flat-screen television which also had a camera built into it, and you never knew when government staff may be watching you. The main character would sit in the corner where the camera couldn’t see him. It was the only place in his entire world where he could have any privacy. Scary, but the world’s moving in that direction, though even I don’t like looking at it sometimes. Not too long from now our cars may be sending the government logs of everywhere we go. Our phones sending logs of everything we say and where we go and who we talk to. I don’t like it. I don’t own a cell phone, rarely drive my car, and try to live as privately as possible, even though it gets harder every day. I hope we’re always allowed to use cash, though today it’s getting more difficult to do so. Banks already log “suspicious activity reports” on you if you withdraw more than a few hundred bucks from your account in cash, or if you deposit significant amounts of cash. They want everything to be electronic, and it’s all logged. I don’t think it’s anyone’s business what I own, how much money I’m making, or anything of that sort. But banks send off all your information to credit agencies, and those agencies sell “reports” on anyone and everyone. You can get them for as cheap as $50. A complete breakdown of someone’s life. Their marriages, where they live, where they’ve lived in the past, if they’ve had financial difficulties, debts they currently have, who they owe it to and for what, what they own (so banks can know what collateral they have), family members (for contacts and references), employers (past and present), traffic violations, education level and where they’ve gone to school, and the list goes on. Doesn’t take much more than a Google search these days to get all that information. And what if someone’s crazy, like a stalker? Our entire lives shouldn’t be up for sale to anyone willing to pay money for the information! Even worse, this information is being sold about people RIGHT NOW and people don’t even know it. Some creep on the internet may buy information and know everything about you, and you don’t even know it!

    Back in old times the people could rebel against the government if it became too corrupt. But how could you fight a super-technologic government? I have no clue. You’d have absolutely no means to organize. We can’t ever let the government get that powerful.

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