Chapter 30: Defense
Updated: 1/13/20
Christian Economics: Teacher's Edition
The Lord spoke to Moses, saying, “Make two silver trumpets. Of hammered work you shall make them, and you shall use them for summoning the congregation and for breaking camp. And when both are blown, all the congregation shall gather themselves to you at the entrance of the tent of meeting. But if they blow only one, then the chiefs, the heads of the tribes of Israel, shall gather themselves to you (Nunbers 10:1–4).And the sons of Aaron, the priests, shall blow the trumpets. The trumpets shall be to you for a perpetual statute throughout your generations. And when you go to war in your land against the adversary who oppresses you, then you shall sound an alarm with the trumpets, that you may be remembered before the Lord your God, and you shall be saved from your enemies (Numbers 10:8–9).
The Mosaic law made it difficult for the nation to go to war. There was no king initially. The tribal leaders had to call a war. Their decision had to be supported by the priests in order to be valid. Second, other tribes were not required by law to join the ones that wanted war. This is clear from the account of Deborah’s war against the Canaanites. Some tribes refused to join her. She criticized them in her song (Judges 5:15–17). But she did not attempt to impose negative sanctions. There were none to impose. The Mosaic law was silent on this.
In addition, there were exemptions from a compulsory draft.
The officers shall say to the army: “Has anyone built a new house and not yet begun to live in it? Let him go home, or he may die in battle and someone else may begin to live in it. Has anyone planted a vineyard and not begun to enjoy it? Let him go home, or he may die in battle and someone else enjoy it. Has anyone become pledged to a woman and not married her? Let him go home, or he may die in battle and someone else marry her.” Then the officers shall add, “Is anyone afraid or fainthearted? Let him go home so that his fellow soldiers will not become disheartened too” (Deuteronomy 20:5–8).
The soldiers who went into battle were committed to the war. It had been authorized by both the civil government and the priesthood. This was not some foolhardy war started by a king on his own authority.
The biblical doctrine of war is based on the need for defense against invasion. Israel’s conquest of Canaan was a one-time event. But it remained as a model for Israel. God was the defender of Israel, but only for as long as Israel remained obedient (Deuteronomy 8:19–20). He established a military chain of command. This was why He twice ordered Moses to count the number of men above age 19 (Numbers 1:45–46; 26:14). This was the age for enrollment in God’s holy army (Exodus 30:12–15). Initially, this numbering was tribal: multiple chains of command in one army. This manifested the one and the many. The tribes had their own flags (Numbers 2:2).
A military chain of command was God’s way to establish responsibility. With the creation of a king, Israel established a single chain of command (I Samuel 8). A chain of command is basic to national defense. Military commanders must be under political control. Rank determines the degree of authority and therefore personal liability of each member of the hierarchy. Military authority requires this sanction to be used against desertion and mutiny. This power of life and death is an aspect only of the civil covenant. No other covenantal organization possesses this sanction. No strictly contractual organization possesses it.
National defense is inherently a monopoly of civil government. Why? First, to allow profit-seeking armies, navies, and air forces to bid for market share would legalize warlords until one of them was victorious over the others. He would then set up a state. Second, profit-seeking military forces would also destroy a fundamental military strategy: concentration of force. The nation would be militarily weak and therefore less costly to conquer. “When the cost falls, more is demanded.” There would be more invasions than would be the case under a single, tax-funded military. Another state would conquer. There is no way to avoid the establishment of civil government. It is an inescapable concept.
The state must fund this single chain of command. Why? Because if the free market funded the military by voluntary donations, everyone would seek to minimize his payment. Most residents would refuse to pay. They would assume that someone else would pay. Or they would think this: “Why should I pay if others don’t pay?” This is the familiar theoretical problem of the free rider. The free rider benefits from others’ expenditures while not paying for this benefit. In the area of national defense, voluntary payments would lead to a level of military funding that is less than individuals would vote for if everyone in the geographical region by law had to pay his predictable percentage.
Wars must be paid for. There are only three ways: taxation, borrowing, and central bank monetary inflation. Modern governments use all three methods. In August 1914, World War I broke out. All European nations revoked the gold coin standard by the end of the year. This enabled them to inflate their currencies to pay for war materials. This led to rising prices. Rising prices forced people whose incomes did not rise as rapidly as prices did to restrict their purchases. This was an inflation tax. This helped pay for the war.
The war consumes raw materials that would have been used to produce consumer goods. Government spending redirects production from consumer goods to war goods. Citizens can no longer purchase as many consumer goods as before. Their standard of living falls. It falls dramatically for people who are conscripted into the armed forces. They lose their freedom. Their lives are placed at risk. Even if they volunteer, they face a decline in living standards. Those who are killed experience the definitive decline in living standards.
The people who are now part of the armed forces can no longer contribute to the production of goods and services in the consumer sector of the economy. Labor services get scarce at the old prices. So, employers must raise wages to recruit replacement workers, especially women, out of their homes and into factories.
In order to conceal the effects of price inflation from the public, governments in major wars place price controls and wage controls on the economy. They also substitute ration coupons for currency. They do this to make it more difficult for rich people to buy as much as they can afford to buy with money. Politicians fear envy of the rich by the masses, whose sons have been drafted into the armed forces. “They are profiting from the war!” Envy is bad for morale, both in the armed forces and at home. Controls always disrupt price signals to producers. Meanwhile, various government planning agencies issue exemptions to certain producers of war materials. These producers are able to buy at above-market prices. This is another way to move the economy from the production of consumption goods to war goods.
The controls create illegal black markets where people can use fiat money to buy goods at prices above the official prices and also without ration coupons. The black market subsidizes exchanges based on the exchange of personal favors, which leave no traces. Favors become an unofficial currency.
Price controls generally do not apply to used goods. This is because sales are difficult to trace. Also, common people want to be able to trade what they no longer want for things they need. They think they have a right to what whatever they want with their own property. The politicians do not want to alienate these people. It would be bad for morale. The controls therefore subsidize used goods markets and specialists in these markets.
The rich buy war bonds, since they have fewer investment opportunities, and the economy offers fewer things to do with their money legally. This does not reduce the costs of the war. The war must be paid for now, with today’s weapons and lives. Borrowing makes it easier to get rich people to stop spending money in the private sector. They hope to be repaid. The problem is, they will be repaid with depreciated money. So, the rich try to buy things, such as undeveloped real estate or works of art, that may appreciate along with the price inflation.
The Bible does not specify how taxes are to be collected. It does criticize monetary inflation and its effects. “Your silver has become dross, your best wine mixed with water” (Isaiah 1:22). It recognizes monetary inflation as a form of theft: tampering with the scales.
You shall not have in your bag two kinds of weights, a large and a small. You shall not have in your house two kinds of measures, a large and a small. A full and fair weight you shall have, a full and fair measure you shall have, that your days may be long in the land that the Lord your God is giving you. For all who do such things, all who act dishonestly, are an abomination to the Lord your God (Deuteronomy 25:13–16).
If the government is paying for the war by direct taxation, a buyer has less money to spend than he did before the war began. The government extracts money from him so that he will not be able to bid against the government in the market. The market process is allowed to function. Prices reveal accurate information about what buyers want to buy. But the government is now a major buyer.
A buyer must readjust his budget. He has less money to spend today. But it is likely that this situation will get worse if the war escalates. So, he may decide to save more money. Even better in terms of historic practices in wartime, he will go out and buy items that he knows will get scarce under wartime controls. If he acts before price controls are imposed, this is legal. He must become an entrepreneur. He must figure out which goods will get scarce or more expensive. He must factor in the possibilities of barter. He should budget in terms of this assumption: used goods will not be under the controls. In other words, he should estimate how the auction process will allocate goods under conditions of government controls.
On December 7, 1941, the Japanese Navy bombed Pearl Harbor in the Hawaiian islands. That was a Sunday. On Monday, an economically wise man would have taken a day off. He would have gone to his bank and withdrawn most of his savings. Then he would have gone out and purchased a new set of tires for his car, including inner tubes. He would have bought spark plugs. He would have bought spare parts for any piece of equipment in his business. If he was a farmer, he would have ordered a delivery of gasoline for a buried fuel tank. His wife would have purchased sugar in bulk in 25-pound sacks. Maybe she would have gone one town away, where no one knew her. She would have bought steel trash cans to put the bags of sugar into. Rats and mice were a threat. She would have bought anything that might wear out in a long war. She would have bought pairs of nylon hose by the dozens. They became great barter items. They had been on the market for less than two years. Nylon would soon be used to produce parachutes, not hose. She would have bought razor blades by the dozen. So would her husband if he did not use a straight razor. Women who ran out of blades had to use their husbands’ razors.
Prices are set by competition: buyers vs. buyers. But the biggest buyer in a war is the national government. The citizen is unable to compete. He must do without.
A seller of anything the government is buying is assured of sales. His problem will be in obtaining raw materials and labor. He may be granted special exemptions from controls to buy them. All other producers will have to scramble to obtain production goods. There is no problem in selling goods under price controls. The problem is obtaining production goods and labor.
Prices are set by competition: sellers vs. sellers. But sellers who cannot obtain scarce goods will not be in a position to compete.
In the days before price controls, prices were set by open competition. Whoever had the most money to bid for production goods would remain in the market as a seller. After the controls are imposed, the government is the main buyer. Whether the seller was paid immediately was a question.
Sellers of consumer goods after 1941 faced government rationing and a shortage of supplies. Consumers had to cut back on expenditures. Someone who sold to the rich probably was able to continue. The rich always have money to spend on luxuries. But someone who sold to the middle class faced reduced demand for most goods. Families bought staples, but not luxuries. Someone who sold to the poor faced reduced demand, but probably not so great as the person who sold to the middle class. The poor could barter. They bought only basics. A nation that could not supply basics to the poor was in danger of losing the war. Basic foodstuffs were available unless the war was going very badly.
The person selling repair services fares well in wartime. He can work at his own pace. He does not answer to anyone except the customer. When supplies get scarce, people must keep existing equipment going. The person who can keep old equipment going finds demand. He can barter if the buyer has no extra money. He can swap for broken equipment that he can fix. He can use broken machines for spare parts. The jack of all trades is in a strong position as a seller. Buyers have few options. Demand is high. Supplies of such services are scarce, since younger men are in the armed forces.
A pencil is representative of a common consumer good. Because pencils are used in schools, the government must make sure that sufficient pencils are available for schools. Also, pencils are used in government offices. The problem is in obtaining the raw materials used in their production. If there are price controls, prices no longer send accurate signals. The division of labor suffers. A pencil has so few components that it is more likely that they will be available than the raw materials used in complicated goods. It has fewer production processes that are dependent on accurate prices. Prediction of supplies is easier. Yet the problem remains: coordination under a price control economy. Prices cease to offer accurate information about supplies.
The state is an agency of coercion. That is its specialty. It is inherently an agency of violence. It is covenantal under God, not contractual under individuals. Therefore, national civil governments fight wars. Profit-seeking businesses do not have the specialized skills and enormous resources required to fight a war. They can provide equipment and services to a central agency of violence, but they are not specialized providers of violence. In peacetime, a private industry that supplies these violence-related services would soon become the new government. The national government monopolizes the supply of these services. The voters control who is elected to high office to supervise these services. They possess no similar authority over private businesses in a biblical commonwealth.
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