This is a guest post by two WWII veternas, Clifford D. Clark and Medford H. Shively. Please comment freely--they are very interested in hearing the views of other WWI vets, as well as Vietnam and Iraq-Afghanistan vets, on these issues of war and taxes. [edited 6/14 to correct inset for quotations.]
Freedom Before Self Interest: Views of Two Wartime Veterans, by Clifford D. Clark and Medford H. Shively
From War to Warm Reception Home.
Walking through central Wurzburg, Germany sixty-six years ago, a few members of Cannon Company, 222nd Regiment, 42nd Division, began to discuss reasons for our presence there. Most of us accepted the president’s position that we were fighting for the broadly defined goals of freedom and democracy. One person, however, forcefully insisted that we were there to satisfy financial interests of munitions producers. Most of us rejected the idea; yet it raised serious questions. Had we been misled by our government? Should we ease on our commitment to combat? These questions lingered as the division moved east over the next few weeks.
On April 29, our truck with cannon drove through the gates of Hitler’s first concentration camp at Dachau. A short time before our arrival, soldiers from other companies of the division and another division had opened the camp of 30 thousand emaciated and starving prisoners and removed the SS guards. We were met with throngs of prisoners, Jews, Romani (gypsies), gays, and political dissidents. Many prisoners remained in their over-crowded beds because they were unable to walk. Along the adjoining railroad track was a trainload of dead prisoners (except for one) shot by the guards the night before our arrival. We gave those who surrounded us most of our supplies, but we knew their tragedies far exceeded any action we could take.
We now know that this brief encounter with destructive consequences of socially inspired hatred and disrespect sharply changed our life directions. In our daily lives, we would try to counter acts of prejudice and exclusion, and attempt to contribute to the development of more democratic processes. We set aside all doubts about the war’s purpose.
Upon return to the United States, we were greeted warmly in our hometowns and given the valuable opportunity, funded by the GI Bill, to finish college. We earned doctorates in economics and business administration, respectively; married; created families; and carried with us a continuing sense of responsibility for the condition of our country.
We believe that most returning veterans and most civilians at the time held similar views. Despite much grumbling, many recipients of large incomes were willing to pay steeply progressive taxes because they acknowledged the contribution of public institutions to the outcomes of their work efforts. Economic historian Benjamin Friedman in his The Moral Consequences of Economic Growth describes these predominant attitudes of the quarter century from 1948 to 1973. He notes that: “Americans accepted new responsibilities to share the nation’s material success with their less fortunate fellow citizens” (at 196).
During the ‘golden era’ of the post-war period, the actions of freedom riders and others led to the expansion of civil rights; many social prejudices were targeted; programs for early education (such as the Head Start program) were supported; medical care for the elderly and poor was provided; new immigrants were admitted, aid was given to central cities; a minimum wage was adopted; banks were firmly regulated to limit risk taking; highways were expanded; science education was strengthened; a program for the reconstruction of Europe was implemented; and nearly eight million veterans with the aid of the GI Bill attended college or enrolled in job-oriented training centers.
In economic terms, these expansive programs were in large degree investments in human and social capital, determining sources of economic productivity. In the late ‘80s a Congressional committee reviewed the GI Bill’s economic impact and found the returns to its expenditures were six fold when measured in contributions to national income and 1.3 times when measured in tax receipts. In her study of the impact of the bill, Suzanne Mettler investigated its influence on citizenship. She found that participants gave extraordinary attention to civic organizations and community affairs. She concluded that “The lessons of the GI Bill offer powerful evidence that through public investment that acknowledges civic obligation with expanded social opportunity, democracy itself may be vitalized.” We believe it is not by chance that the growth in national income per capita during that period was greater and more equitably distributed than in any other quarter century of US history.It was a time when, in 1950, as many as 90 percent believed that government would ‘do what is right.’ By 1974, the Gallup poll on trust in government (in the federal government on domestic problems) had fallen by almost half to 47 percent. A poll in the NY Times/CBS, April 15-20, 2011, shows that 70 percent believe the country “has seriously gotten off on the wrong track.”
Decline in Civility.
Now, more than a generation after the ‘golden era’, members of the public are distrustful of government, impatient with their neighbor’s beliefs, depressed by job shortages and low wages, uneasy about war commitments, concerned that the expanding income gap between the rich and the rest will threaten stability, and fearful that the American Dream may have vanished, for them and for their children. Many are also astonished by Congressional proposals “that will hurt the poor, the elderly and the vulnerable” by cutting unemployment assistance, Medicaid, Medicare, and Social Security, and for unbending efforts to stop abortions, to prevent same sex marriages, to ignore scientific warnings of global warming, and the denial by some states of immigrants’ rights. Further, they are surprised by the efforts of state governments to outlaw unions, and are offended by the reduction of state and federal taxes of the wealthy when the number of impoverished citizens is increasing.
In the years before WWII there were many open threats to internal security, such as the German invasions of Austria and Czechoslovakia and of France, before President Roosevelt declared war.In the time before engagements in Vietnam and Iraq, there were few threats-- only the hypothetical events set forth by Presidents Johnson and Bush.
Following combat during WWII each of us spent months working in Vienna with the four-power government of Austria. There we learned some of the city’s history, particularly its increased discrimination against Jews during the last half of the nineteenth century. That era, it seems, established a pattern of behavior that was influential later in Germany. Anger and disrespect was often expressed in acts of violence. As stated below, we believe that our country’s long pursuit of freedom can be reinvigorated so as to offset negative turns to deny the rights of particular groups or individuals.
We understand that there are many contributing factors, yet we believe the roots of society’s unease are to be found in the country’s ill-considered decisions to go to war in two instances, in Vietnam and Iraq. These two wars made large demands on productive resources, limited public and private investment, created widespread distrust of our representative political institutions, and led to the formation of a permanent arms industry.
Conflict of National Goals.
In a January 1961 farewell address, Dwight Eisenhower warned that because the arms industry had become a permanent part of the economy it would threaten many aspects of our society.
Until the latest of our world conflicts, the United States had no armaments industry. American makers of plowshares could, with time as required, make swords as well. But we can no longer risk emergency improvisation of national defense, we have been compelled to create a permanent armaments industry of vast proportion. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security more than the net income of all United States corporations.
This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence—economic, political, even spiritual—is felt in every city, every state house, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved, so is the very structure of our society.
In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.
A permanent arms industry, focused on a single buyer, would rely on specialists in persuasion to sell products rather than on competition. On occasions of limited demand the industry might require survival assistance. Effective efforts of the industry to persuade the government as buyer would necessarily extend to members of Congress as well as administrative officials. And it would require an enlarged group of lobbyists whose activities might alter processes of political representation.
Conflict between investments in support of economic vitality and expenditures for military strength is not unique to the United States. Paul Kennedy in his The Rise and Fall of The Great Powers finds a pattern of competition for economic resources between military needs and investment purposes in Europe since 1500. He holds that when a nation gives preference to military power, it may lose economic power.
[W]ealth is usually needed to underpin military power, and military power is usually needed to acquire and protect wealth. If, however, too large a proportion of the state’s resources is diverted from wealth creation and allocated instead to military purposes, then that is likely to lead to a weakening of national power over the longer term. In the same way, if the state overextends itself strategically—by, say, the conquest of extensive territories or the waging of costly wars—it runs the risk that the potential benefits from external expansion may be outweighed by the great expense of it all—a dilemma which becomes acute if the nation concerned has entered a period of relative economic decline.
The military costs of the war in Vietnam from 1965 to 1975, excluding costs of veterans, support of allies, and interests on loans, amounted to $111 billion (or $738 billion in 2010 prices) or about 2.3% of annual Gross Domestic Product (GDP) during the peak year. The Johnson administration chose to pay for the war by borrowing and by diverting expenditures from non-military purposes, including programs of the Great Society, rather than adding meaningful war taxes. Over the decade of war, the national debt increased by $214 billion. Although surtaxes were levied, the war was financed primarily by borrowing, and so were other activities of about the same amount. Increases in debt and money supply as well as sudden increases in oil prices led to the destabilizing inflation at the end of the decade.
In addition to the war’s economic impact, the administration’s questionable explanations for the country’s involvement in the conflict gave rise to deep public distrust of political leaders and public institutions, particularly by those of college age. With cause, this young generation questioned the president’s justifications. Having seen the misuse of police and city government in the civil rights struggle and having experienced rigid policies in college communities and unresponsive administrators on the campuses (and witnessed, at least through television, the disaster of National Guard attacks on unarmed student protestors), they expanded their criticisms of bureaucracy to include many others, such as university presidents and deans, city mayors, chiefs of police, and business leaders. They became vocal protestors of policies and procedures that seemed to them to epitomize the problems of war without reason and poverty without redress.
On the other hand, many Americans who were relatively satisfied with their normal routines were offended by the young and their eagerness to overturn traditional ways of doing things. They sought to repress their demonstrations and they rejected their cultural challenges.
The war continued for a decade. By the time veterans began to return in large numbers, they did not face the warm appreciation of people back home that had greeted the veterans of World War II. Instead, some were scorned for their participation in what was viewed as a wrongful war, and others faced harsh charges of ineptitude, or worse, criminal misconduct during the war (such as the My Lai incident). Campuses were in turmoil.
During this same period, many residents of central cities were looking for more freedoms along the lines promised by the civil rights expansion and programs to reduce poverty. They sought removal of restrictions on housing. They wanted more respect from police forces. And, perhaps most importantly, they wanted the opportunity for better jobs.
Self Interest, Inequalities, Impaired Democracy, and Explosive Debt.
These two parallel struggles were linked by war-related reductions in anti-poverty funds. It seemed as though the war and its aftermath had created a new division in society—one between the older and more satisfied generation and the younger generation that demanded changes to reflect a better understanding of the role of the military, war, and poverty in society. That division was also reflected in the social issues that began to rage between affluent residential areas, often in the suburbs, and poverty-stricken inner cities. These underlying currents of mistrust and resentment made more acceptable than in previous years the basic assumption of classical economics that individuals in pursuit of self-interest, unconcerned with (troublesome) others, served the well-being of society. The idea, including the superiority of free markets to actions of government, gained influence in the ‘70s and ‘80s despite its narrowness. “Most of us, ”according to Joseph Stiglitz, “would not like to think that we conform to the view of man that underlies the prevailing economic models, which is a calculating, self-serving, and self-interested individual. There is no room for having human empathy, pubic spiritedness, or altruism.”(FreeFall, at 249) Nevertheless, politicians sought advice from economists, particularly from those who stressed unregulated markets, opposed anti-cyclical remedies as suggested by John Maynard Keynes, and enacted policies regardless of any third party consequences, externalities, biased results, or the nature of demand, whether for military or peaceful purposes.
We believe an indicator of the arms industry’s success is the increased economic inequality in the distribution of family income as influenced by policies sought by its lobbyists, such as deregulation of the financial markets; reductions in upper-income tax rates; favored treatment of capital gains, special forms of income, inheritances, and corporations; reduced concern about monopolies; and unfavorable treatment of unions. From 1974 until 2007 the top one percent of households, ranked by income including capital gains and dividends, increased their share of total incomes from 8 percent to 18 percent. The upward redistribution of income is likely to continue as long as elections are subject to unrestrained financial and lobbyist influence. Indeed, the changes in institutional conduct represent serious threats to democratic processes. Larry Bartels expresses it this way: “Economic inequality clearly has pervasive, corrosive effects on political representation and policy making in contemporary America.”
The Iraq war, which began in 2003, created a new division, and recharged remnants of the former division between groups of citizens. Some were supportive of the administration’s argument that Iraq’s leaders were among those responsible for the destruction by air in New York, Pennsylvania and at the Pentagon. Others, though supportive of the initial response to invade Afghanistan, believed that such efforts should be brief and followed by reconstruction, unlike the withdrawal of US forces when the Soviet military pulled out more than a decade earlier. This group was not convinced by the Bush administration’s warnings of threats from weapons of mass destruction, perhaps recalling the Johnson administration’s arguments for the war in Vietnam.
The costs of the war’s military operations in Afghanistan from 2001 plus operation in Iraq from 2003 through fiscal 2010 (excluding veterans benefits, interest on debt or aid to allies and including related expenditures in the Philippines and southern Africa) amounted to $1.05 Trillion, or 1.2% of GDP during the peak year of spending. The national debt increased from $5.77 trillion in 2001 to $13.53 trillion in 2010, or by $7.76 trillion, or more than seven times the war expenditures. In sum, the increase in debt during our involvement in Vietnam was twice the direct costs of the war; that is, we postponed raising funds for the war and borrowed an equal amount for normal government operations, but tax rates were maintained. The increase in debt during the years of the war to 2010, in Iraq-Afghanistan, was seven times the direct costs of the war; that is, we not only postponed raising funds for the war but shifted large expenditure obligations of government from tax revenues to debt by reducing taxes at the same time that we waged the war effort. In neither case was the public asked to pay either the full costs of the war during the conflict, or even a portion, such as one-fifth, with the full war debt to be repaid in five years.
Seeds of Hope.
A lesson that citizens, Congress, and the White House should take from Vietnam and Iraq is that dishonest engagements create an environment of distrust not only of government but also among citizens. Not only were resources diverted from economic development, but also for many, any sense of national community was shattered, and the narrow philosophy of self interest with its lack of concern about poverty or distribution of economic returns gained favor. How can our society turn from tendencies toward mutual disregard to a more friendly environment so that our grandchildren and great grandchildren will have freedom to develop their latent talents, gain self-respect, and have voice in institutions of government? It is almost certain that an extension of today’s circumstances and inequalities would dramatically fail tomorrow.
To be responsible we should work to expand the range of individual freedoms. Amartya Sen makes the argument succinctly.
[T]he substantive freedoms that we respectively enjoy to exercise our responsibilities are extremely contingent on personal, social, and environmental circumstances. A child who is denied the opportunity of elementary schooling is not only deprived as a youngster, but also handicapped all through life (as a person unable to do certain basic things that rely on reading writing and arithmetic). The adult who lacks the means of having medical treatment for an ailment from which she suffers is not only prey to preventable morbidity and possibly escapable mortality, but may also be denied the freedom to do various things—for herself and for others—that she may wish to do as a responsible human being. The bonded laborer born into semislavery, the subjugated girl child stifled by a repressive society, the helpless landless laborer without substantial means bonded laborer born in semi-slavery, the subjugated girl child stifled by a repressive society, the helpless landless laborer without substantial means of earning an income are all deprived not only in terms of well-being, but also in terms of the ability to lead responsible lives, which are contingent on having certain basic freedoms. Responsibility requires freedom.
The argument for social support in expanding people’s freedom can, therefore, be seen as an argument for individual responsibility, not against it. The linkage between freedom and responsibility works both ways. Without the substantive freedom and capability to do something, a person cannot be responsible for doing it. But actually having the freedom and capability to something does impose on the person the duty to consider whether to do it or not, and this does involve individual responsibility. In this sense, freedom is both necessary and sufficient for responsibility. (Sen, Development As Freedom, at 283-284)
 Clark has a PhD in economics from the University of Chicago, worked at the Central Intelligence Agency, taught at North Carolina State University and New York University, served as dean of business at the University of Kansas and as president of Binghamton University. He is now University Professor Emeritus at Binghamton and a visiting professor of development economics at Wayne State University.
Shively received his PhD from Western Colorado University while teaching business administration at Kansas Wesleyan University. Later he was Personnel Director at a state of Kansas hospital for the disabled. Recently Shively received the Chevalier (Knight) medal of the National Legion of Honor from the French Republic. This is the highest award given by France for service to the Republic. The National Legion was founded by Napoleon in 1803. Clark and Shively shared responsibility for a 105 mm cannon during the war. Both received the bronze star for action in combat.
 Joseph Stiglitz in Freefall: America, Free Markets, and the Sinking of the World Economy, notes that there were no serious financial crises during the period. ”The quarter century from 1945 to 1971 was exceptional in that though there were fluctuations, there were no banking crises anywhere in the world except in Brazil, in 1962. Both before and after this period they were a regular feature of economic life. Professor Franklin Allen of the Wharton School of the University of Pennsylvania and Douglas Gale of New York University [in Understanding Financial Crises] provide a convincing interpretation for why the quarter century after World War II was free from crises: the global recognition of the need for strong regulation. The greater stability may have been one of the factors contributing to the rapid growth and greater equality of that era.” (at 240).
 Suzanne Mettler, Soldiers to Citizens, 42.
 Subcommittee on Education and Health of Joint Economic Committee, A Cost-Benefit Analysis of Government Investment in Post-Secondary Education Under the World War GI Bill, December 14, 1988.
 Mettler, Soldiers to Citizens, 175.
 Report on a letter from over 75 Catholic University Professors to John A. Boehner in the New York Times, May 12, 2011.
 See Norman Polmar and Thomas B. Allen, World War II: The Encyclopedia of the War Years, 1941—1945.
 See: Robert S. Wistrich, The Jews of Vienna in the Age of Franz Joseph, (Oxford,1989); and Brigitte Hamann, Hitler’s Vienna: A Dictator’s Apprenticeship (Oxford,1999).
 Dick K. Nanto of the Congressional Research Service in “Economics and National Security: Issues and Implications for U.S. Policy” CRS Report for Congress, January 4, 2011 at 20.
 Paul Kennedy, The Rise and Fall of The Great Powers, xvi.
 When long run costs of veterans, aid to allies, and interest are added, the total might be doubled or more.
 Stephen Daggert, Costs of Major Wars, Congressional Research Service, RS22926, June 2010.
 Thomas Sugrue explains in The Origins of the Urban Crisis: Race and Inequality in Postwar Detroit, that the uprising in Detroit was connected in part to cuts in Johnson’s poverty programs: “Detroit’s attempts to take advantage of the largesse of the Great Society offered too little, too late for Detroit’s poor, but raised expectations nonetheless.” (at 260)
 Jacob S. Hacker and Paul Pierson, Winner-Take-All Politics, at 15. Calculated by the authors from data published by the Congressional Budget Office.
 Larry M. Bartels, Unequal Democracy, at 284.
 Stephen Daggett, Costs of Major U.S. Wars, Congressional Research Service, June 29, 2010.
 Kaushik Basu in Beyond the Invisible Hand: Groundwork for a New Economics writes “the truth about economic development is that it needs human beings to be other-regarding, fair, and trustworthy” at 118.