By Steven Clyde
There are 40,000,000 men under arms in the world today, and our statesmen and diplomats have the temerity to say that war is not in the making. Hell’s bells! Are these 40,000,000 men being trained to be dancers?
– General Smedley Butler, War is a Racket (1935)
The second lesson of economics—after scarcity is recognized as the first—is cost. There are costs in relation to everything we do.
For example, if I spend $10 on a new hat, I am giving up everything else I could have purchased: a quality burger and fries, a cheap watch, a CD, two $5 scratch-offs, etc. But considering the first lesson of politics is to ignore the first lesson of economics, it is no surprise that the second lesson of economics is treated as non-existent.
On January 17th, 1961, Dwight D. Eisenhower gave his farewell speech, which was a warning we still ignore to this day:
Our military organization today bears little relation to that known by any of my predecessors in peace time, or indeed by the fighting men of World War II or Korea. Until the latest of our world conflicts, the United States had no armaments industry. American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions. 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 State 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.
General Smedley Butler, who at the time of his death was the most decorated Marine in the military, took part in missions throughout countries such as Cuba, the Philippines, China, Nicaragua, etc. In his 34 years of service not only did he witness massive amounts of waste, but he took note of the deception that arose out of the military-industrial complex. During the early 1930’s Butler gave a speech across the country titled “War is a Racket,” which he later went on to publish as a small book in 1935.
His inferences range from hilarious to completely absurd, yet he recognized that it hadn’t always been this way:
Until 1898 we didn’t own a bit of territory outside the mainland of North America. At that time our national debt was $1,000,000,000. Then, we became “internationally minded.” We forgot, or shunted aside, the advice of the Father of our country. We forgot George Washington’s warning about “entangling alliances.” We went to war. We acquired outside territory. At the end of the World War period, as a direct result of our fiddling in international affairs, our national debt had jumped to over $25,000,000,000. Our total favorable trade balance during the twenty-five-year period was about $24,000,000,000.
But then who profits from war? Only a select few do, and this type of profit is in no way related to the voluntary exchange of goods and services; this money is first seized from the citizens and then wasted by the government. He goes on to name and shame those that were able to pocket the money through this time period:
Take our friends the du Ponts, the powder people . . . the average earnings of the du Ponts for the period 1910 to 1914 were $6,000,000 a year. Now let’s look at their average yearly profit during the war years, 1914 to 1918…fifty-eight million dollars a year profit we find!
Take one of our little steel companies…their 1910-1914 yearly earnings average $6,000,000. Then came the war….their 1914-1918 average was $49,000,000 a year!
Or, let’s take United States Steel. The normal earnings during the five-year period prior to the war were $105,000,000 a year…the average yearly profit for the period 1914-1918 was $240,000,000. Not bad.
Or Utah Copper. Average of $5,000,000 per year during the 1910-1914 period. Jumped to an average of $21,000,000 yearly profits for the war period.
The three-year period before the war the total profits of Central Leather Company were $3,500,000…in 1916 Central Leather returned a profit of $15,000,000.
His list doesn’t end there, but he goes on to point out the unfathomable amount of waste that occurs:
Take the shoe people…for instance, they sold Uncle Sam 35,000,000 pairs of hobnailed service shoes. There were 4,000,000 soldiers. Eight pairs, and more, to a soldier…but when the war was over Uncle Sam has a matter of 25,000,000 pairs left over. Bought – and paid for. Profits recorded and pocketed.
They sold your Uncle Sam 20,000,000 mosquito nets for the use of the soldiers…not one of these mosquito nets ever got to France!…these thoughtful manufacturers wanted to make sure that no soldier would be without his mosquito net, so 40,000,000 additional yards of mosquito netting were sold to Uncle Sam. 
One very versatile patriot sold Uncle Sam twelve dozen 47-inch wrenches. Oh, they were very nice wrenches. The only trouble was that there was only one nut ever made that was large enough for these wrenches. That is the one that holds the turbines at Niagra Falls.
Still another had the brilliant idea that colonels shouldn’t ride in automobiles, nor should they even ride on horseback. One has probably seen a picture of Andy Jackson riding in a buckboard. Well, some 6,000 buckboards were sold to Uncle Sam for the use of colonels…not one of them was used.
And who pays for these costs? We do:
We all pay them – in taxation. We paid the bankers their profits when we bought Liberty Bonds at $100.00 and sold them back at $84 or $86 to the bankers. These bankers collected $100 plus.
The brunt of the cost is paid with just the loss of lives and/or one’s livelihood:
…I have visited eighteen government hospitals for veterans. In them are a total of about 50,000 destroyed men – men who were the pick of the nation eighteen years ago.
…at Milwaukee, where there are 3,800 of the living dead…mortality among veterans is three times as great as among those who stayed at home.
In the government hospital in Marion, Indiana, 1,800 of these boys are in pens! Five hundred of them in a barracks with steel bars and wires all around outside the buildings and on the porches. These already have been mentally destroyed. These boys don’t even look like human beings…mentally they are gone.
And what incentivizes the soldier to carry on in this manner? Things that are completely artificial, to say the least:
Up to and including the Spanish-American War, we had a prize system, and soldiers and sailors fought for money. During the Civil War they were paid bonuses…the government, or states, paid as high as $1,200 for an enlistment. …so by developing the Napoleonic system – the medal business – the government learned it could get soldiers for less money, because the boys liked to be decorated.
In part 2, further costs of war will be examined.
 This shouldn’t be confused with the idea of a “zero sum game”. Is it not true that when one person gains wealth, that it is by default at the expense of another (though it can be through coercion/violence).
 See Henry Hazlitt, Economics in One Lesson, (New York: New Rivers Press, 1979), pp. 15-24., Also see Murray Rothbard, Man, Economy, and State, (Auburn: Ludwig von Mises Institute, 2011), pp. 17-18.
 See here for the full transcript: https://www.ourdocuments.gov/doc.php?flash=false&doc=90&page=transcript
 Smedly Butler, War is a Racket (Aristeus Books: 2014), pp. 13-14.
 Ibid. pp. 16-17.
 Ibid. pp. 17-18.
 Ibid. p. 18.
 Ibid. p. 18-19.
 Ibid. p. 19.
 Ibid. pp. 22-23.
 Ibid. p. 24.
 Ibid. pp. 26-27.
 Ibid. p. 27.
 Ibid. p. 32., He points out on page 41 that soldiers bought about “$2,000,000,000 worth of these bonds.”
 Ibid. p. 32-33.
 Ibid. p. 34.
 Ibid. p. 36-37.
For the history you didn’t learn in school, check out Liberty Classroom: