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This is a revised version of a talk given at the October 28th, 2006 Mises Institute Supporter’s Summit, “Imperialism: Enemy of Freedom.” The original talk, “Taxation, Inflation, and War” is available in MP3 audio from Mises Media.
Praxeology and War
Commentaries on war stretching back more than two millennia to the Peloponnesian Wars have enshrouded the fundamental causes of war in an almost impenetrable fog of myths, fallacies, and outright lies. In most studies, war is generally portrayed as the inevitable outcome of either complex historical forces or accidental circumstances generally beyond the understanding or control of the human combatants.
Fortunately, there exists a science of human action that is applicable to all purposeful activities. This science is referred to as “praxeology.” Although economics is its most developed branch, the basic principles of this science can also be applied to analyzing violent action including warfare. Thus Murray Rothbard wrote:
The rest of praxeology [besides economics] is an unexplored area. Attempts have been made to formulate a logical theory of war and violent action, and violence in the form of government has been treated by political philosophy and by praxeology in tracing the effects of violent intervention in the free market.
As Rothbard suggested, what we might call the “Logic of War Making” is a relatively undeveloped area of the science of human action. Its elaboration is therefore especially necessary if we are to dispel the mythology of war and elucidate its true origin and character. The basic axiom of this praxeological discipline is that war is the objective outcome of the human endeavor of war-making.
As a human endeavor like any other, war-making is the product of reason, purpose and choice. Therefore a proper analysis of war must take into account the goals of the war makers, the means at their disposal, the benefits they anticipate from the war and the costs they expect to incur in executing it. It also must distinguish in a general way between the individual beneficiaries and victims of war. These victims include not only the vanquished group of war makers and those who reside in the territory they control but especially the productive inhabitants of the region controlled by the victorious organization of war makers.
The Meaning of Imperialist War
At this point it is necessary to define war and distinguish it from other forms of inter-human violence in order to circumscribe the bounds of the logic of war-making within the general praxeological system. For not all violent conflict constitutes war-making. War is here defined as violent interaction between two groups of humans, one or both of which is a state. We adopt the definition of the state given by the anthropologist and historian of primitive warfare, Lawrence H. Keeley:
States are political organizations [that] have a central government empowered to collect taxes, draft labor for public works or war, decree laws, and physically enforce those laws. Essentially states are class-stratified political units that maintain a “monopoly of deadly force” – a monopoly institutionalized as permanent police and military forces.
Pre-civilized social groups such as bands, tribes and even chiefdoms are not states because, according to Keeley, “a chief, unlike a king, does not have the power to coerce people into obedience physically,” instead employing economic means or exploiting a belief in magic to enforce his decrees. Although Keeley refers to “pre-state warfare” or “primitive war,” for the purposes of praxeological analysis, we restrict the term the “war” to violent conflicts involving at least one state.
Combat between looser social groupings was most commonly motivated by vengeance for previous homicides or economic issues, especially access to natural resources and crude capital goods. For example in Minnesota the Chippewa and Dakota Sioux tribes battled one another for over 150 years over access to hunting territories and wild rice fields, while tribes in the Pacific Northwest frequently fought for frontage on the ocean and rivers giving access to the salmon run. Anthropological studies show that, while most of these conflicts involved savage violence and extreme cruelty, often resulting in the expropriation, enslavement, expulsion or annihilation of the vanquished tribe, their purpose was never to establish a hegemonic relationship and exact regular tribute from the foe. As Kelley explains, “Polities that lack the physical power to subjugate their own populations or to extract involuntary tribute or taxes from them are extremely unlikely to make war against others for these purposes, since they lack the institutional and administrative means to convert victory into hegemony or taxation.”
Thus, while both non-state social groups and states have historically engaged in the violent annexation of territories to acquire natural resources, only states possess the institutional means necessary to pursue a policy of imperialism i.e., the ongoing subjugation and economic exploitation of other peoples. Imperialist wars waged by states in every epoch of history are not accidental; they are the outcome of the powerful tendency to war-making inherent in the very nature of the state.
War Making and Class Conflict
All governments past and present, regardless of their formal organization, involve the rule of the many by the few. In other words, all governments are fundamentally oligarchic. The reasons are twofold. First, governments are nonproductive organizations and can only subsist by extracting goods and services from the productive class in their territorial domain. Thus the ruling class must remain a minority of the population if they are to continually extract resources from their subjects or citizens. Genuine “majority rule” on a permanent basis is impossible because it would result in an economic collapse as the tribute or taxes expropriated by the more numerous rulers deprived the minority engaged in peaceful productive activities of the resources needed to sustain and reproduce itself. Majority rule would therefore eventually bring about a violent conflict between factions of the previous ruling class, which would terminate with one group establishing oligarchic rule and economically exploiting its former confederates.
The second factor that renders oligarchic rule practically inevitable is related to the law of comparative advantage. The tendency toward division of labor and specialization based on the unequal endowment of skills pervades all sectors of human endeavor. Just as a small segment of the population is adept at playing professional football or dispensing financial advice, so a tiny fraction of the population tends to excel at wielding coercive power. As one writer summed up this Iron Law of Oligarchy: “[In] all human groups at all times there are the few who rule and the many who are ruled.”
The inherently nonproductive and oligarchic nature of government thus ensures that all nations under political rule are divided into two classes: a productive class and a parasitic class or, in the apt terminology of the American political theorist John C. Calhoun, “taxpayers” and “tax-consumers.”
The king and his court, elected politicians and their bureaucratic and special-interest allies, the dictator and his party apparatchiks – these are historically the tax-consumers and, not coincidentally, the war makers. War has a number of advantages for the ruling class. First and foremost, war against a foreign enemy obscures the class conflict that is going on domestically in which the minority ruling class coercively siphons off the resources and lowers the living standards of the majority of the population, who produce and pay taxes. Convinced that their lives and property are being secured against a foreign threat, the exploited taxpayers develop a “false consciousness” of political and economic solidarity with their domestic rulers. An imperialist war against a weak foreign state, e.g., Grenada, Panama, Haiti, Iraq, Afghanistan, Iran, etc. is especially enticing to the ruling class of a powerful nation such as the United States because it minimizes the cost of losing the war and being displaced by domestic revolution or by the rulers of the victorious foreign state.
A second advantage of war is that it provides the ruling class with an extraordinary opportunity to intensify its economic exploitation of the domestic producers through emergency war taxes, monetary inflation, conscripted labor, and the like. The productive class generally succumbs to these increased depredations on its income and wealth with some grumbling but little real resistance because it is persuaded that its interests are one with the war makers. Also, in the short run at least, modern war appears to bring prosperity to much of the civilian population because it is financed in large part by money creation.
We thus arrive at a universal, praxeological truth about war. War is the outcome of class conflict inherent in the political relationship – the relationship between ruler and ruled, parasite and producer, tax-consumer and taxpayer. The parasitic class makes war with purpose and deliberation in order to conceal and ratchet up their exploitation of the much larger productive class. It may also resort to war-making to suppress growing dissension among members of the productive class (libertarians, anarchists, etc.) who have become aware of the fundamentally exploitative nature of the political relationship and become a greater threat to propagate this insight to the masses as the means of communication become cheaper and more accessible, e.g., desktop publishing, AM radio, cable television, the Internet, etc. Furthermore, the conflict between ruler and ruled is a permanent condition. This truth is reflected – perhaps half consciously – in the old saying that equates death and taxes as the two unavoidable features of the human condition.
Thus, a permanent state of war or preparedness for war is optimal from the point of view of the ruling elite, especially one that controls a large and powerful state. Take the current US government as an example. It rules over a relatively populous, wealthy, and progressive economy from which it can extract ever larger boodles of loot without destroying the productive class. Nevertheless, it is subject to the real and abiding fear that sooner or later productive Americans will come to recognize the continually increasing burden of taxation, inflation, and regulation for what it really is – naked exploitation. So the US government, the most powerful mega-state in history, is driven by the very logic of the political relationship to pursue a policy of permanent war.
From “The War to Make the World Safe for Democracy” to “The War to End All Wars” to “The Cold War” and on to the current “War on Terror,” the wars fought by US rulers in the twentieth century have progressed from episodic wars restricted to well-defined theaters and enemies to a war without spatial or temporal bounds against an incorporeal enemy named “Terror.” A more appropriate name for this neoconservative-contrived war would involve a simple change in the preposition to a “War of Terror” – because the American state is terrified of productive, work-a-day Americans, who may someday awaken and put an end to its massive predations on their lives and property and maybe to the American ruling class itself.
In the meantime, the War on Terror is an open-ended imperialist war the likes of which were undreamt of by infamous war makers of yore from the Roman patricians to German National Socialists. The economist Joseph Schumpeter was one of the few non-Marxists to grasp that the primary stimulus for imperialist war is the inescapable clash of interests between rulers and ruled. Taking an early mega-state, Imperial Rome, as his example, Schumpeter wrote:
Here is the classic example … of that policy which pretends to aspire to peace but unerringly generates war, the policy of continual preparation for war, the policy of meddlesome interventionism. There was no corner of the known world where some interest was not alleged to be in danger or under actual attack. If the interests were not Roman, they were those of Rome’s allies; and if Rome had no allies, then allies would be invented. When it was utterly impossible to contrive such an interest – why, then it was national honor that had been insulted. The fight was always invested with an aura of legality. Rome was always being attacked by evil minded neighbors, always fighting for a breathing space. The whole world was pervaded by a host of enemies, and it was manifestly Rome’s duty to guard against their indubitably aggressive designs. They were enemies who only waited to fall upon the Roman people. [No] attempt [can] be made to comprehend these wars of conquest from the point of view of concrete objectives…. Thus there is but one way to an understanding: scrutiny of domestic class interests, the question of who stood to gain…. Owing to its peculiar position as the democratic puppet of ambitious politicians and as the mouthpiece of a popular will inspired by the rulers [the Roman proletariat] did indeed get the benefit of the [war] booty. So long as there was good reason to maintain the fiction that the population of Rome constituted the Roman people and could decide the destinies of the empire, much did depend on its good temper…. But again, the very existence, in such large numbers, of this proletariat, as well as its political importance, was the consequence of a social process that also explains the policy of conquest. For this was the causal connection: The occupation of public land and the robbery of peasant land formed the basis of a system of large estates, operating extensively and with slave labor. At the same time the displaced peasants streamed into the city and the soldiers remained landless – hence the war policy.
The latifundian landowners were, of course, deeply interested in waging war…. . The alternative to war was agrarian reform. The landed aristocracy could counter the perpetual threat of revolution only with the glory of victorious leadership. [I]t was an aristocracy of landlords, large-scale agricultural entrepreneurs, born of struggle against their own people. It rested solely on control of the state machine. Its only safeguard lay in national glory…. An unstable social structure of this kind merely creates a general disposition to watch for pretexts for war – often held to be adequate with entire good faith – and to turn to questions of foreign policy whenever the discussion of social problems grew too troublesome for comfort. The ruling class was always inclined to declare that the country was in danger, when it really was only class interests that were threatened.
This lengthy quotation from Schumpeter vividly describes how the expropriation of peasants by the ruling aristocracy created a permanent and irreparable class division in Roman society that led to a policy of unrestrained imperialism and perpetual war. This policy was designed to submerge beneath a tide of national glory and war booty the deep-seated conflict of interests between expropriated proletarians and landed aristocracy.
Democracy and Imperialist War Making
Schumpeter’s analysis explains the particularly strong propensity of democratic states to engage in imperialist war-making and why the Age of Democracy has coincided with the Age of Imperialism. The term “democratic” is here being used in the broad sense that includes “totalitarian democracies” controlled by “parties” such as the Nationalist Socialist Workers Party in Germany and the Communist Party in the Soviet Union. These political parties, as opposed to purely ideological movements, came into being during the age of nationalist mass democracy that dawned in the late nineteenth century.
Because the masses in a democratic polity are deeply imbued with the ideology of egalitarianism and the myth of majority rule, the ruling elites who control and benefit from the state recognize the utmost importance of concealing its oligarchic and exploitative nature from the masses. Continual war-making against foreign enemies is a perfect way to disguise the naked clash of interests between the taxpaying and tax-consuming classes.
In this vein, it is noteworthy that the first instance of sustained global imperialism in the Western world was the democratic city-state of Athens. Victor Davis Hanson has emphasized this in his path-breaking work on the Peloponnesian War. Hanson writes:
“Athenianism” was the Western world’s first example of globalization. There was a special word of sorts for Athenian expansionism in the Greek language, attikizô, “to Atticize,” to become like or join the Athenians.
By the standards of the time, the expanse of the Athenian empire was breath-taking. By the outbreak of the Peloponnesian War, the Athenian empire had swelled to “nearly two hundred states run by seven hundred imperial overseers.” According to Hanson, “To maintain such an empire, in the fifth century [B.C.] Athens had fought three out of every four years, a remarkable record of constant mobilization, unrivaled even in modern times.” Moreover, unlike its openly oligarchic rival Sparta who led a loose voluntary coalition of states that genuinely feared a “proselytizing and expansionary” Athenian democracy, Athens unilaterally formulated and imposed a single strategy on its imperial subject-states and allies.
Hanson does not shrink from noting the parallels between the imperialism of ancient Athens and the modern US mega-state, writing:
Although Americans offer the world a radically egalitarian popular culture and, more recently, in a very Athenian mood, have sought to remove oligarchs and impose democracy – in Grenada, Panama, Serbia, Afghanistan and Iraq – enemies, allies, and neutrals alike are not so impressed. They understandably fear American power and intentions while our successive governments, in the manner of confident and proud Athenians, assure them of our morality and selflessness. Military power and idealism about bringing perceived civilization to others are a prescription for conflict in any age – and no ancient state made war more often than did fifth-century imperial Athens.
Severing The Sinews of Imperialist War
Ernest Hemingway once wrote, “The sinews of war are five – men, money, materials, maintenance (food) and morale.” In a modern market economy, Hemingway’s five M’s, in practice, boil down to one: money. A political oligarchy that rules and exploits a large and productive economy need only get its hands on sufficient monetary funds in order to obtain the men, material, and maintenance necessary to carry out its war plans. Furthermore, an ever expanding supply of money and credit also boosts the morale of the civilian population by distorting economic calculation and creating the temporary illusion that war brings prosperity. Thus Cicero spoke more truly when he said, “The sinews of war, a limitless supply of money.”
Explaining the connection between monetary inflation and civilian morale during wartime, Mises wrote in 1919:
In every great war monetary calculation was disrupted by inflation…. The economic behavior of the belligerents was thereby led astray; the true consequences of the war were removed from their view. One can say without exaggeration that inflation is an indispensable means of militarism. Without it, the repercussions of war on welfare become obvious much more quickly and penetratingly; war weariness would set in much earlier.
However, the initial stages of war inflation must eventually give way to crisis and depression. The reason is that war entails a massive consumption of capital because of the diversion of real resources from production for present and especially future civilian needs – that is, the maintenance and replacement of capital goods – to production for immediate military purposes. The productive class only becomes aware of the enormous destruction of its real income and wealth when inflation ceases and the ensuing crisis and recession reveal the true costs of the war, aside from its physical destruction of lives and property. At this point the bitterly disillusioned and demoralized producers begin to realize that their own interests are not identical with those of their imperialist rulers.
In the two World Wars of the twentieth century the war makers on both sides were able to forestall this day of reckoning by abrogating the freedom to produce and exchange and instituting a more or less thoroughgoing command economy featuring pervasive price controls and central direction of production and distribution by legal fiat. Things are different in contemporary imperialist wars, such as those fought by the United States since the end of the Cold War. The reason is that the vast disparity in military and economic power between the imperial state and the state it wishes to subjugate obviates recourse to massive monetary expansion.
For example, the current US war on Iraq is estimated to have cost roughly $346 billion from its inception in 2003 until the present. During this time, the change in the Adjusted Monetary Base (MB), which is completely controlled by the Fed and represents the “seigniorage” or inflation tax that the government realizes from money creation, has been about $137 billion. But the rate of growth of MB has steadily declined from mid-2002 from 10 percent to below 5 percent currently. This is reflected in a decline in the rates of growth of broader monetary aggregates such as MZM, M2, and M3. Yet at the same time, US Federal Government debt has ballooned by nearly $2 trillion since March 2003, expanding the total debt accumulated since the inception of the American Republic by over 30 percent! How has this flood of new debt been financed if not by money creation?
The answer is by borrowing from foreigners. In March 2003, foreign investors held about $1,286.3 billion of Federal government debt. By June 2006, foreign investors were holding $2091.7 billion of the debt, an increase of $805.4 billion or over 40 percent of the increase of the total debt since March 2003. In other words, foreigners have by and large financed the US imperialist adventure in Iraq, greatly mitigating the economic burden of the war borne by US taxpayers and consumers – at least until foreigners refuse to absorb any more US debt. At this point increased taxation and more rapid money creation must be resorted to in continuing to finance the war as well as the interest payments on the outstanding debt.
In the meantime, an interesting issue to contemplate is whether an aroused and disgruntled taxpaying class has any means at its disposal short of violent revolution for putting an end to the never-ending series of imperialist wars sucking the lifeblood (accumulated capital) out of the economy and consuming its real wealth and income. Vladimir Lenin’s answer was, “[C]onvert the imperialist war into a civil war; all consistently waged class struggles in wartime and all seriously conducted ‘mass-action’ tactics inevitably lead to this.” The logic of war-making in conjunction with its cognate praxeological discipline, economics, reveals that Lenin’s dictum is indeed practicable and that there are a number of peaceful tactics available to the productive masses that strike directly at the sinews of the imperialist war machine.
The first is the general strike, an Atlas Shrugged scenario writ large, in which the producers go on strike for lengthy periods of time and live off their accumulated savings. This chokes off the current taxes that pay for the war as well as the military supplies needed to execute it. Mass boycotts of goods and services produced by enterprises directly profiting from the war as well as central government enterprises such as the post office strike directly at the revenues of the tax-consuming class. So do economic boycotts of the mass media, including establishment newspapers and periodicals and the major television broadcast networks. In the contemporary United States, the latter, in particular, are little more than legally licensed cartelists spewing forth government war propaganda.
Withdrawing all bank deposits and using only cash or barter arrangements in exchange would cause the fractional-reserve banking system to grind to a halt for a lengthy period of time as the monetary authorities would have to freeze all bank accounts until sufficient currency was printed and delivered to banks throughout the country. This would take months and would completely disrupt the monetary and financial system in the meanwhile, forcing the government to resort to the archaic and costly technique of literally printing up and shipping new currency to pay for its war expenditures. Selling government bonds en masse causing their prices to plunge would wreak havoc with the balance sheets of banks and other financial institutions and make it extremely difficult for the government to issue war debt.
These mass-action tactics would have a number of additional and very important benefits. First, they would cause a deep rift in the ruling class, which, in a plutocratic democracy such as the United States, is by no means monolithic because it includes significant elements of the big business and finance establishment that are competing with one another for subsidies and special legal privileges from the state.
This uneasy coalition of political interests can be readily destabilized by the radical change in the pattern of benefits and costs brought about by mass-action tactics that unevenly affect the revenues and subsidies of politically connected business firms. Thus, those industrial firms and financial institutions suffering significant hardships from these tactics would turn against the war, thereby shrinking and weakening the ruling class. With the prospect of civil war with its former allies looming, those in control of the state apparatus would have a strong incentive to halt its war-making activities.
Second, other business firms completely outside the ambit of the tax-consuming, government-industrial complex – e.g., McDonald’s, Wal-Mart, Microsoft, etc. – would also suffer economic losses as a result of the general strike and financial collapse, giving them an incentive to ally themselves with the renegade firms that were formerly members of the political establishment. This newly emergent anti-state coalition of business organizations could also peacefully strike at the enfeebled and demoralized imperial state by refusing to do business with it and threatening to blacklist individual bureaucrats and politicians as candidates for the anticipated lucrative jobs in the private sector.
Finally, the anti-imperialist alliance of large and powerful business interests brought into existence by the general strike and other peaceful mass-action economic tactics would naturally, if unintentionally, interpose itself as a protective shield between the economically debilitated but still dangerous and vindictive state and the individual dissidents of the taxpaying class.
The praxeological method, which has been used successfully to elaborate the laws of economics, is also capable of yielding a systematic body of truths when applied to the analysis of war. Although the logic of war-making has yet to be fully elaborated, it is clear that this praxeological sub-discipline is useful in dispelling the long entrenched myths and fallacies about war. The logic of war-making also provides knowledge of the means to those whose goal, for ideological or economic reasons, is to bring about the cessation of a war.
 Murray N. Rothbard, Man, Economy and State: A Treatise on Economic Principles, 2nd ed., Scholar’s ed. with Power and Market: Government and the Economy, 3rd ed., Scholar’s ed. (Auburn, AL: Ludwig von Mises Institute, 2004), p. 74
 Lawrence H. Keeley, War before Civilization: The Myth of the Peaceful Savage (New York: Oxford University Press, 1996), p. 27.
 Ibid., p. 115.
 Ibid., p. 116.
 Arthur Livingston, Introduction in Gaetano Mosca, The Ruling Class: Elementi di Scienza Politica, ed. Arthur Livingston, trans. Hannah D. Kahn (New York: McGraw-Hill Book Company, 1939), p. x. On the Iron Law of Oligarchy, also see Murray N. Rothbard, For a New Liberty: The Libertarian Manifesto, 2nd ed. (San Francisco: Wilkes & Fox, 1996), pp. 45–69.
 John C. Calhoun, “A Disquisition on Government,” in Union and Liberty: The Political Philosophy of John C. Calhoun, ed. Ross M. Lence (Indianapolis, IN: Liberty Fund, 1992), pp. 15–21.
 On the concept of “totalitarian democracy,” see J.L. Talmon, The Origins of Totalitarian Democracy (New York: W. W. Norton & Company, Inc.,  1970). My conception of totalitarian democracy differs from Talmon’s because he applies the term only to “Totalitarianism of the Left” and but not to “Totalitarianism of the Right” (ibid., pp. 6–8).
 Victor Hanson Davis, A War Like No Other: How the Athenians and Spartans Dought the Peloponnesian War (New York: Random House, 2005), p. 14
 Ibid., p. 27
 Ibid., pp. 13, 29.
 Ibid., p. 8.
 Ludwig von Mises, Nation, State, and Economy: Contributions to the Politics and History of Our Time, trans. Leland B. Yeager (New York,: New York University Press, 1983), pp. 163.
 For an explanation of how financing war through money creation distorts and conceals its actual costs, see Joseph T. Salerno, “War and the Money Machine: Concealing the Costs of War beneath the Veil of Inflation,” Journal des Economistes et des Etudes Humaines 6 (March 1995): 153–73.
 For a description of the process by which the US economy was transformed into a command economy during World War II, see Robert Higgs, Crisis and Leviathan: Critical Episodes in the Growth of the American Government (New York: Oxford University Press, 1987), pp. 196–236.
 As an indication of the enormous expense involved in printing Federal Reserve dollar notes, a 2002 study by the Government Accounting Office estimated that even replacing $1 notes only by $1 coins would save $500 million annually (Barbara Hagenbaugh, “Dollar Coin Series Will Feature Presidents,” USA Today.
Joseph Salerno [send him mail] is academic vice president of the Mises Institute, chairman of the graduate program in economics at Pace University, and editor of the Quarterly Journal of Austrian Economics.