Paul Krugman is famous for having said essentially that one of the ways the US could pull itself out of the current recession/depression is by mobilizing for an alien invasion. A War of the Worlds would do the trick. Everyone could build space ships and laser guns and whatever to fight the otherworldly menace. Stimulus. Full employment!
Now we are faced potentially not with a war between worlds, but a war with a virus. Shouldn’t this also according to Dr. Krugman’s logic be good for the economy? I mean around the world people are mobilizing. Money is being spent. Isn’t this great?
The argument is a little more complex than this but fundamentally not much more complicated.
(From Real Clear Markets)
If the often-fatal disease spreads, demand for hazmat suits will surge, not to mention hospital clinics, workers to build barricades, security guards to man quarantine checkpoints, probate officers, orphanages, and a host of other government services. It’s a good bet ammunition sales would also rise, along with canned food, firewood, and funeral services, stimulating the private economy. A lovely pestilence could create just as many jobs as a global war.
Former Obama advisor Christina Romer has pointed out: “The lesson [of World War II] is that demand is crucial – and that jobs don’t go unfilled for long. If jobs were widely available today, unemployed workers would quickly find a way to acquire needed skills or move to where the jobs were located.”
And if those jobs were located in the middle of a hot zone, even better. Leftist economists have bemoaned the low price of labor for over a century, advocating various artificial means to raise it, such as boosting the minimum wage and forming unions. But reducing the supply of labor could boost wage rates naturally and permanently.
A side note. Using Krugman’s disaster stimulus thesis, wouldn’t global warming and the carnage it supposedly will wreck on the globe be a kind of an ongoing, worldwide stimulus project? After all people will have to rebuild after hurricanes, seawalls will be built to keep the ocean at bay, indeed whole cities might have to be reconstructed further inland. According to Krugman isn’t this ideal?
But how much do you want to bet that if asked Krugman would say of course that global warming was terrible.