For us, the Cold War had three major phases: The stand-off in Berlin, the long dark quiet leading up to the collapse of Detente and the Reagan-era spending binge which led to the collapse of the Soviet Union. The first phase was conducted by two fully mobilized, combat experienced countries standing opposite each other over the wreckage that was then Europe. The second phase cost less (the Marshall plan was a smart investment decision), but was dreary and mostly uneventful. I exclude Korea and Vietnam from the NATO discussion, perhaps unfairly. The last phase was hugely expensive and generated significant “what are we doing/guns and butter” political dialogue here in the US.

From the perspective of some in the US, the smaller portions of smaller GDPs spent by European NATO countries in their own defense during that last phase – mostly as you say, spent on conscript armies that would have been cheap at half the price – we’re scarcely worth the cost. Token contributions, some might have thought, intended to reassure the US Congress that Europe was just serious enough about its own defense to ensure that the US remained committed as well. I know that our ambivalence caused concern over there as well.

After the Cold War ended, we cast about for reasons to keep the Alliance whole. Europe had a hard time getting off the starting line for the crises in the near abroad in Bosnia and Kosovo. Until 9/11 and Afghanistan, it was never clear that Europe could muster the political will to engage a “common enemy” outside of Europe. NATO’s support in Afghanistan now is as welcome as the caveats host governments place upon their soldiers’ employment there are not.

In short, we are nothing like done with a shaking out of roles and missions, but that may have to wait until the current unpleasantness has subsided.

Meanwhile, we over here are always having that “guns and butter” argument. One of the main sources of opposition in the US to the war in Iraq is, I think, the fact that it is sucking up all the fiscal oxygen. Some people argue that we should more closely follow the European model. Others think, the world being what it is, that niche is full for now, that someone has to play the role that America has played in the past and that it might as well be us.

“Europe has a wonderful social safety net. That they built on the back of the US defense of their continent during the Cold War.”

“… many over here argue that the US could also have the same quality of social systems as does Europe (and infrastructure now too, apparently) if only we didn’t spend it all on defense.”

First, our defense spending of 1.5% GDP justly angers our allies, not just the Americans. Problem is, there is no sense for Germany to spend more money on defense until the German public makes up it mind on what wars it wants to fight at all and what would be a rightful cause to to go to war, because that determines what kind of military you need (draft army, oversea expedition chorps, peacekeeping troops …). That discussion is just going on.

The big difference to the time of the cold war is that Europeans at that time did not see any choice like “kindergardens or jet-fighters”, that slogan just came up with the 80’s peace-movement. That obviously escapes American conservatives and left-wingers alike.

In fact, they maintained those big draft armies and the expensive well-fare state at the same time. OK, draftees are cheaper to pay than professional soldiers, but from the 19 year old’s perspective it is indeed a big tax-burden to spend two years in the barracks for virtually no pay. Both comes out of the same communitarian spirit of mutual solidarity, you might call it socialist if you want to.

The very paragon of the well-fare state, Sweden, developed its own jet-fighters in that era. I have an old almanac from 1983 which gives as defense expenditure for that year: Denmark 2.5%, Germany 2.8%, US 3.1%, Netherlands 3.4% Sweden(neutral) 3.4%. Apart from the US, they were all well-fare states and had draft-armies.

Since the nineties, defense expenditure shrunk as much as the benefits of the public well-fare programs. “State” is the wrong word, the classical European perception is that of a mutual insurance. In fact the American left ist out for a bad surprise when it thinks that less military budget means more social spending. If you cannot pay the one, you cannot pay the other.

The realists were sometimes forced to choose between evils, hoping to select the lesser form. After the Iranian Revolution, Saddam seemed much the better option – although Kissinger I believe hoped that both sides might lose.

After Halabja and Kuwait the scales fell from our eyes and Saddam’s Ba’athist regime became the more immediate threat.

We are sometimes forced to hold the hand of evil, but we should never consign ourselves to marrying it.

And when the Chinese get that dollar they don’t stuff it in a mattress, they buy raw materials and Boeings and wheat and bonds with it.

But don’t listen to me, rather read somebody who is considered an authority on the subject:

http://www.gmu.edu/departments/economics/wew/articles/07/deficit.html

Like I said, it’s when we stop trading that economies fail. And as for the Carter reference, ya gotta admit the man is smart. I mean, I’m pretty sure he’s smarter than I even if he does say “nucular” and I’d wager smarter than you since, well, he’s been the POTUS and neither of us have, plus that whole nuke school thing, and the Academy ring, kind of difficult to knock those sorts of checks on the old fitrep towards being a smart kind of guy. And look what happend on his watch…

The point of that isn’t to blame the administration specifically, I was more inclined to praise the work of the Fed in managing a huge economy using only a small tool. Finally, what was once termed “voodoo economics” and what the former communists thought they could plan five years in advance is seen for what it is, a market that can only be influenced by providing a comparison for investment value. It can never be led. Once it is led, a free market fails to work.

– Max

Just so happens he has a post up about the (gasp) decline of the dollar.

Question: Is the dollar higher or lower now than it was during the Carter Presidency?

For the answer you can go here: http://www.optimist123.com/optimist/2007/09/interest-rates-.html#comments

Might be surprised what you learn.