No one disputes that US investors were huge beneficiaries of World War I. Nor does anyone dispute that historically private weapons manufacturers and financers have benefited from wars going far back into the Middle Ages. As we will see when we read G Arrighi later in the semester, since they are often guaranteed by governments or (in monarchies) governing families and since they appear at times of extreme need, wars are among the most profitable investments investors can make. But their benefits are not universal. Just as Italy and Spain were losers in the conflict between Spain and Holland (16th century), or just as Spain, Germany, and France were losers in the conflict between Spanish and England (17th century), so Germany and England were losers in the two conflicts that gutted Europe mid-twentieth century.
The truth is, so long as nations go to war, someone needs to put up the capital to finance those wars and someone needs to produce the weapons that belligerents purchase in order (they hope) to win those wars.
It is less often remarked how those who finance and supply warfare are politically and economically empowered by their readiness to lend capital and produce weapons, stealing much more of a share of the market and garnering much more political influence, relative to their competitors and relative to other sectors, than they would have in the absence of war.
As a very young JM Keynes commented in 1917:
The sums which this country [Great Britain] will require to borrow in the United States of America in the next six to nine months are so enormous, amounting to several times the national debt of that country, that it will be necessary to appeal to every class and section of the investing public. . . . It is hardly an exaggeration to say that in a few months’ time the American executive and the American public will be in a position to dictate to this country on matters that affect us more dearly than them.
Yet bankers and weapons manufacturers often feign indifference in the causes of war and peace, almost as though they are merely responding to popular political “demand” (and not the rational drive to maximize return on investment).
Considering the delegation that Woodrow Wilson brought with him to Europe following the war, composed largely, as J Frieden observes, of “representatives of Wall Street [such] as [J.P.] Morgan’s Thomas Lamont, Norman Davis, Bernard Baruch, and a young John Foster Dulles”—a pattern repeated in nearly every major previous conflict and every conflict since—it is easy to see why some might see war financiers and suppliers as “merchants of death.”
Do economists have a responsibility to consider the benefits bankers and weapons manufacturers gain from conflicts between nations?