Krugman: Terrorism Will Be Good for the French Economy
You just knew it was coming.
He tries to duck and weave and not come out and say it, but that is clearly his point:
[I once] facetiously suggest[ed] that we fake a threat from space aliens, to provide a politically acceptable cover for stimulus.
Now France has been attacked, unfortunately by real terrorists instead of fake aliens, and Hollande is declaring that security must take precedence over austerity. Is this the start of something big?
OK, obligatory disclaimer that will do no good in the face of the stupidity. I am NOT saying that terrorism is a good thing, just as those of us who point to wartime fiscal stimulus aren’t saying that World War II was a good thing. (Don’t kill baby Hitler — we need him to justify stimulus!) We’re just trying to think through some side effects of the atrocity.
The question we should ask is whether the fiscal indiscipline caused by jihadists will make a significant difference to French performance.
Well, my guess is that the numbers will probably be too small. U.S. defense and security spending rose by around 2 percent of GDP after 9/11 — but that involved a much bigger military buildup than France is likely to undertake, plus the Iraq War. More likely we’re looking at fraction of a percent of GDP, which is small compared with the austerity Europe has imposed. Unless the French response is much bigger than I’m imagining, the impact on growth won’t be large.
BTW I would suggest that the stupidity is a Noble Prize winner in geography writing such an absurd analysis.