Ep. 10 Terrorism Creates Jobs

21 November 2015     |     Tom Woods     |     29

Krugman’s commentary on the Paris attacks is partly correct, with the usual nonsense thrown in. Even better his is blog post earlier this week, assessing whether there might be good economic effects from the terrorist attack if the French government spends enough money in response. That kind of analysis is why Contra Krugman exists, folks.

Scott Horton joins us this week.

About the Guest

Scott Horton hosts the Scott Horton Show on the Liberty Radio Network, and Antiwar Radio on 90.7 FM KPFK in Los Angeles.

Krugman Column

Fearing Fear Itself” (November 16, 2015)

Krugman Blog Post

Terrorists and Aliens” (November 17, 2015)

Related Krugman Item

Reckonings; After the Horror” (September 14, 2001)

Contra Columns

Apocalypse Not, Krugman
Krugman on National Security State: ‘He’s Normal,’” by Bob Murphy
Lost on the ‘Dark Side’ in Syria,” by Alastair Crooke
Austerity in Europe Does Not Mean Massive Spending Cuts,” by Veronique de Rugy
Austerity: The Relative Effects of Tax Increases versus Spending Cuts,” by Veronique de Rugy

Resource Mentioned

World War II and American Prosperity

Video Mentioned

Hillary Clinton on Her Vote for War in Iraq

Special Offers

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  • Khalil Shalash

    Amazing episode gentelmen, Scott Horton is an encyclopedia on US foreign policy.

  • LibertyJunkie

    i didn’t see the reference in the show notes for the explanation of why the New Deal and WW2 did NOT pull us out of the great depression. Please post when you can. thanks

    • caso0

      I think Tom did a few episodes of his daily show on this at some point. Also a great reference on this is the Mises youtube clip “Contrasting Views of the Great Depression” by Bob Murphy. It was excellent for addressing the specifics of the new deal and the economic impact of WW2

  • RobertRoddis

    I again raise a continuing objection (pretend we’re in civil litigation) to our continuous failure/refusal to demand that the statists prove that the market fails and/or failed in the past. Put the burden of proof on them. The Keynesians argue:

    Keynesians: The free market results in perpetual under-employment.

    We respond:

    Austrians: These situations are not testable like a physics experiment. Further, Austrian analysis demonstrates how human beings operate and perpetual under-employment does not result from laissez faire.

    Keynesians: You Austrians are cranks.

    Austrians: These unemployment problems you complain about can all be attributed to violent state intervention in the economy, especially intervention in the areas of money and credit. WWI caused an extreme move towards central banking and government control of the economy. It was these interventions which caused the Great Depression, not the free market.

    Keynesians: Did you say something?

    Austrians: See. You Keynesians are so afraid of our analysis that you will not even engage us on the merits.

    Keynesians: Fringe. Neo-confederates.

    Austrians: Fine. Identify for us precisely when in history Rothbardian laissez faire failed requiring the type of violent intervention you insist is necessary.

    Keynesians: LOL! There has never been such a time! And there never will be such a time for you loons! Plus, private property and the NAP are violence!

    Austrians: OK. Then when did the market fail? How do you know it fails? How you going to run your physics-like experiment to show that it fails?

    Keynesians: Crackpots. You’re not getting on TV any time soon.

    Other than that, this episode of CC was outstanding.

    • caso0

      “Austrians: Fine. Identify for us precisely when in history Rothbardian laissez faire failed requiring the type of violent intervention you insist is necessary.”

      “Keynesians: LOL! There has never been such a time! And there never will be such a time for you loons! Plus, private property and the NAP are violence!”

      Even worse than this, they might offer up the Great Depression myth including the Free Market Hoover myth or the “New Deal fixed the economy” myth. Then in desperation after being beaten down on their ignorance of economic and historical events, they might try the “WW2 spending ended the depression” myth. Talk about tossing softballs to an Austrian!

      Also goes down with the “gold standard was a colossal failure” myth and the “deflation causes depressions” myth. I love when the Keynesians try to make these arguments.

      Which reminds me, thank you Tom Woods! You are the reason why many of us can win these battles.

      • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

        But WWII spending did end the depression (of course, it would have probably ended on its own).

        • tolemo

          Robert Higgs has written extensively on this subject. He pointed out that the depression ended after WW2 when the returning vets re-entered the workforce and the distorted wartime rationed economy ended. The Keynesians predicted dire consequences if war spending ended but the opposite happened.

          • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

            Sure, WWII led to consumption repression. But it did raise GDP (both real and nominal) and employment (both public and private). While a lot of the newly created GDP was just gov’t spending, that still means the war ended the period of prolonged unemployment and depressed output that is known in the U.S. as the Great Depression.

          • caso0

            GDP can be very misleading. If the Air Force announced its own economic stimulus program of carpet bombing one American city per week, GDP would skyrocket due to the *spending* from rebuilding, though obviously we would all be far worse off. It’s the broken window fallacy. The same fallacy that leads Krugman to conclude that a hoax alien invasion would fix the economy immediately. Yes he said this. That all of the resources wasted to build defenses for an alien invasion never to come would cause lasting economic prosperity – JUST because massive amounts of money were spent. Private sector output collapsed during WW2 and people lived incredibly austere lives through rationed basic necessities. I don’t think I would call this an economic boom or recovery.

            The really big question here is why did every single recession/depression before the GD recover on it’s own (usually in 2 years or less) with *no* significant government stimulus, yet the first time this strategy was ever tried (in this case), the economy festered in a dire state for at least 10+ years? I don’t see how one draws the the conclusion from that that fiscal stimulus is the cure to economic depression.

          • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

            “GDP would skyrocket due to the *spending* from rebuilding”

            -No, it wouldn’t, due to the collapse in spending resulting from the destruction. Of course, reconstruction would be very quick, and GDP would soon get up to trend. But it wouldn’t get above it.

            Private sector output collapsed in 1942 but increased substantially in 1944 and 1945.

            The economy was recovering normally under FDR (except for mid-1933-mid-1935 and the mysterious 1937). It was just the 1929-1933 collapse that was so great as to leave the residual unemployment very difficult to quickly eradicate.

          • caso0

            I guess it depends on what you destroy. It doesn’t have to be that example. If the US Gov decided it was going to string replicas of the Giza Pyramid from LA to NYC, GDP would explode and obviously this would be economically destructive. I don’t view GDP as something that behaves due to momentum and trend lines like a stock price. It’s just an aggregated measure of total spending.

            The new deal regulations kicked the economy while it was down with bizarre, draconian, and anti-competitive rules. the forced propping up of prices was economically destructive – particularly for wages. It says a lot when you see that unemployment was at 18% by 1939 after several years (and two rounds of) of the new deal and at no point fell below the teens. There was a conservative collation that dismantled much of the new deal in the late 1930s and many of the large programs like the WPA and the CCC had been abolished by the early 1940s. The post-war economy was luck enough to have the burden of the new deal removed.

            I don’t doubt the some of the works programs probably stimulated some temporary employment and drove unemployment down by a couple percentage points, but it seems pretty clear that when the spigot was turn off for some of these in 1937 that unemployment again skyrocketed back to the near-worst levels is the smoking gun that these fiscal economic fixes do not work.

            This was a good article from Bob Murphy about the economic effects of WW2. Another thing to consider is that gov economic statistics from during the war period are notoriously unreliable to the point of being near fabrications. http://www.theamericanconservative.com/articles/the-myth-of-wartime-prosperity/

        • RobertRoddis

          I assume you have a detailed chart of all the unpaid debts from the early 30s where the statute of limitations had not expired as of 12/31/45, right?

  • RobertRoddis

    Also, I submit that we should be continuously saying that Keynesianism and Krugman are the functional equivalent of the MSM and the NYT purposefully failing to report US support for Al Qaeda in Libya and Syria and/or Obama’s installation of Nazis in Ukraine Time to take off the gloves.

  • Joe Eckstein

    I’d like to hear Scott Horton debate Hillary Clinton on foreign policy.

  • caso0

    Tom, what happened to the ContraKrugman YouTube channel???

    I subscribed pretty much the day it was created, but when I click on it now, it says it was banned/censored by YouTube for “spam/misleading content”. Has YouTube become intolerant of libertarian dissent? Maybe it violated their “safe space”?

    • http://www.TomWoods.com Tom Woods

      Someone else set that up on their own. There never has been a Contra Krugman YouTube channel created by us.

  • Jimmy S.

    Excellent episode covering lots of ISIS background and how USA created it. King Abdullah II of Jordan has already said “this is a conflict within Islam” – so tell the CIA to back off and let the local states most affected by the conflict handle it.

  • Brien

    Loving the podcast guys, though may I add in a brief suggestion? If you could end it with something besides, “well that about wraps it up, right?” Leaves things a little flat at the end. Maybe you could end it with a pithy response to Krugman’s main thesis? You’re obviously the professionals, though I keep feeling a bit deflated at the end 🙂 keep up the great work!

  • LibertyJunkie

    thank you

  • Terry5135

    Horton’s summary is probably the best short version overall picture of the entire mess in the ME in this century I’ve ever heard or read. It’s shorthand of course and non-historical, but it’s not empty of details either. It seems like the very least one would assume political leaders’ advisers and think tanks would know well.

    There’s one embedded assumption – not perhaps so much by Horton but referred to – which is nearly universally held by Americans (neoliberals) and even Western Europeans which is that McCain and Romney would have been ever so much worse. Maybe or maybe not. On the surface, the reasoning is pretty obvious. What’s less obvious is anything in an alternate universe, as tempting as it may be to wish to make comparisons.

    The thing not accounted for (and utterly unpredictable) in such scenarios is the dynamics involved as when people, in the American context, like Romney are elected (I’ll leave McCain out for now, he’s a bit too much of a head case). This dynamic, to put it in [very flawed] b&w terms is a dynamic of opposites. It’s impossible to know what forces would have been awakened or risen if someone like Romney had been elected within DC and the broader American landscape in general.

    What we DO know is that Obama had pretty much a free pass from the mainstream, certainly from liberals. The evidence for that is in part in the very podcast we just listened to. No one criticized Obama. I’m not talking about the wingnuts and rednecks from the Sarah Palin school, but the intelligent classes. Even as far away as Europe, for the first time John Pilger’s submissions were refused by that Italian socialist publication he had long regularly written for. They’re attitude was to go softly. Krugman, along with dozens of others who should know better, walks on eggs if there is anything to criticize about Obama. I admit I don’t get out much, but in Europe, I didn’t run across a single bad word about him until the Irish TD (that’s ‘mp’ for most of you) Clare Daly stood up and called him a war criminal in June, 2013. I had been wondering since mid 2009 where the voices were. When I discussed things with my friends (Americans), I just heard back the “Romney would have been worse” argument from even the most enlightened of them. And I guarantee we’re going to hear this reasoning as every Tom Dick and Harry predicts the future in support of Clinton, who is obviously a sociopath in addition to being a corporate whore.

    Just remember that it was Nixon – the shadow side of the more well known Joe McCarthy, his mirror image in fact but less notoriety – in the midst of the greatest period of protest unrest since the Depression who started the EPA, who re-established Diplomatic relations with China. and who, incidentally (for people of this site) completed the final stages of total disengagement from the gold standard.

    Having said all that, I reiterate my initial praise for Horton’s analysis. It was magnificent.

    • RobertRoddis

      Scott Horton is amazing. I’ve been lucky enough to have listened to about 95% of his podcasts since 2008. Your insight into the reaction to Obama by liberals is insightful but I think things go much deeper and are more bizarre than that. I have also had the fortune or misfortune to have joined a Facebook “group” of Michigan Republicans. Regardless of the evidence presented, they
      cannot and/or will not conceptualize the idea that Obama is anything other than a reincarnation of George McGovern, a cowardly out-of-touch liberal weenie who just cannot understand the dangers of “radical Islam” and/or aggressive dangerous Russia. They cannot process the idea that Obama and Hillary flattened Libya and then ran Gadaffi’s weapons out of Libya via Benghazi to Al Qaeda in Syria. The cannot process the idea that Israel commits war crimes on a massive scale and that it has been aiding the head-chopping Sunni rebels in Syria. They cannot process the idea that Obama installed authentic Nazis in Ukraine apparently because it conflicts with their image of the naïve/incompetent/Kumbaya Obama.

      BTW, have you guys seen the latest Kasich attack ad on Trump? Trump is a weenie when it come to Putin!!! Fact free messages appeal to the Republican base.


      At the same time, no amount of evidence of Obama as war
      criminal (see Tom Woods’ great interview with Laurie Calhoun) will allow “progressives” to conceptualize Obama as anything other than the sweet, lovable wise wonderful open-minded Kumbaya “progressive” president.


      Add to that the undeniable fact that no Keynesian or “progressive
      or Neocon in the galaxy (including Krugman) will process (much less understand) the NAP, economic calculation and/or Cantillon Effects (while none think it necessary to prove that the market fails) and it is easy to understand exactly why we are where we are.

      • RobertRoddis
        • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

          Don’t forget Erdogan.

      • Terry5135

        I don’t disagree with any of that, aside from not knowing what ” Cantillon Effects” are. I’ll just note that I wasn’t trying to primarily make points about Obama aside from the teflon nature of his tenure (or most of it). My main point was simply to praise Horton and secondarily to try to convey the problem with justifications for people like Obama by contrasting them with others.

        When you say things run much deeper and more bizarre than that, I’m sure they do. I wouldn’t even attempt to make an assertion about the whole puzzle. I will say that I suspect Obama is Pharma’s man and that Pharma is one of, if not THE, greatest threat to us today, but it’s so insidious that it’s nearly invisible. (Interesting this reverse take-over between Pfeizer and Allerton in Ireland currently.) Anyway, much too long a tale to weave in one sitting and others do it so much better, like for instance this link below for just one piece of the mess. Meanwhile, I’m not sure what your overall point was, if the final paragraph was an oblique reference to it – you didn’t state it explicitly, so I’m not sure I know what you see as THE enemy (so to speak) (and aside from ourselves). But I enjoyed your post.


        I’m not even going near the growing binding between medicine-pharma-insurance, but if you think this thing we call ‘science’ will be the most important factor in your health, you’re in a fool’s paradise. Nor am I going near Codex Alimentarius.

        So, dangers? Pharma, MIC, arms manufacturers, or nations and wwiii… take your pic.

  • dagny

    Would it be possible to provide a link for C-K transcripts, as is done on the Tom Woods show?

    • http://www.TomWoods.com Tom Woods

      We don’t have any plans for transcripts for the show. They’re costly to produce, and the show is free. 🙂

      • dagny

        Understandable. Love the (free) show! 😀

  • http://againstjebelallawz.wordpress.com/ Enopoletus Harding

    Scott Horton was great, except for the last part. Of course there are IS sympathizers among Muslims in the West. Of course we shouldn’t care what IS thinks: