On a superficial level, it would seem America’s wars only affect people and places outside the country’s borders – in the land where the war is waged. However, this is a misguided understanding ignoring the downstream effects of war. In truth, the warfare state and the welfare state both have the same end. They concentrate power in the central government.
We will assume for the sake of this short article that a government cannot intervene into the economy without unforeseen negative consequences. This means any attempted government intervention in healthcare, wage laws, the food we eat, our religion, the way we heat our homes or power our cars will fail. In other words: whenever a government gets involved in our lives it will necessarily have ruinous results.
But, what of foreign policy? Can the government go to war abroad without creating negative consequences at home?
One of the best summations of the warfare – welfare connection is by James Madison:
“Of all the enemies to public liberty war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few. In war, too, the discretionary power of the Executive is extended; its influence in dealing out offices, honors, and emoluments is multiplied; and all the means of seducing the minds, are added to those of subduing the force, of the people. The same malignant aspect in republicanism may be traced in the inequality of fortunes, and the opportunities of fraud, growing out of a state of war, and in the degeneracy of manners and of morals engendered by both. No nation could preserve its freedom in the midst of continual warfare.” 
Let us partition and explore Mr. Madison’s warning. Specifically, can we find concrete examples of how war abroad threatens our liberty at home?
“War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few.”
All wars, even those fought only to defend a nation, create opportunities for the federal bureaucracy to centralize power. New government programs and offices are created to support the war effort. Some civil liberties are suspended in the name of security. Of course, government officials promise they will return in full when the war is over. However, returning completely to a prewar status is impossible. Voters become accustomed to a reduction of their civil liberties and dependent on government handouts. 
Before exploring how war abroad perverts our liberty at home, we should understand the economic impacts these war policies have on the American economy.
It has become an accepted fact that World War II brought the U.S. economy out of the morass of the Great Depression. However, this belief fails to take sufficiently into account the understatement of actual wartime inflation by the official price indexes, the deterioration of quality and disappearance from the market of many consumer goods, … and other sacrifices made by consumers to get the goods that were available.
That is to say, first, domestic consumer well-being (not to mention the civilians abroad being bombed) actually declined. The things Americans wanted to buy were not only more expensive because of government policies, but they were also of a lower quality; second, the great intrusion of the government into the domestic economy (e.g. price controls, rationing) give the appearance that the American economy was actually doing better than it really was. The reality was that the “stuff” Americans wanted to buy just wasn’t there. Americans cannot eat or wear bombs, munitions or tanks, so diverting the national economy to producing those things does not make the population better off. It actually makes them poorer.
Once the decision was made to go to war, it was necessary to raise an army. Raising an army meant taking on debt and increasing taxes (or inflating the currency which is another form of taxation) to pay for it.
Mr. Madison was correct. War leads to armies, debts and taxes. But how does it follow that war will bring the many under the domination of the few?
Well, Americans saw that the American war economy was producing tens of thousands of tanks, hundreds of thousands of airplanes, tens of millions of rifles, and tens of thousands of ships. Americans began to think, if the government can produce so many war related materials, why can’t it do the same with domestic items like cars? This, of course, is reminiscent of Frederic Bastiat’s rule – What Is Seen and What Is Not Seen. When laws were passed to build planes and munitions, Americans saw that those items were built. But what was unseen were all the other products American consumers would have purchased had those badly needed resources not been diverted to build things the majority of Americans would never be able to use and had no use for. Americans now had the perception that the government could plan an economy and would be more willing to accept state domination.
“In war, too, the discretionary power of the Executive is extended; its influence in dealing out offices, honors, and emoluments is multiplied…”
On September 8, 1939 President Franklin D. Roosevelt argued that the state of war in Europe imposed a “national emergency” on the United States. This required the exercise of a limited number of emergency powers to be granted to his office in order to enforce the country’s neutrality. On the same day, Roosevelt also signed Executive Order 8248 – which authorized the creation of “such [offices] for emergency management as the President shall determine…in the event of a national emergency, or threat of a national emergency.” Declaring a state of emergency gave President Roosevelt the political environment he
needed to create and reconvene federal agencies directed toward the defense of the United States.
A 1947 series of reports by the Civilian Production Administration’s Bureau of Demobilization show that as the nation moved closer to entry in WWII public sentiment began to coalesce behind the war effort. Though the reports do not give an indication of the level of excitement the public had for the American entry into the European and Pacific theaters of war, there was enough deference to the federal government and the executive in particular for power to concentrate at the top.
In early 1940, Roosevelt re-established the World War I-era National Defense Advisory Commission, a seven-member board of private industry figures. Established with no chairman or other form of leadership, the commission assisted and advised the president on matters relating to “industrial production…industrial materials…employment…prices…farm products…transportation…consumer interests…[and] procurement.” According to the Bureau of Demobilization, since it was still authorized by statute, the president did not have to request legislation from Congress to enable the establishment of a new organization – FDR and his war cabinet argued for bypassing Congress because time was precious and war afoot. 
“The same malignant aspect in republicanism may be traced in the inequality of fortunes, and the opportunities of fraud, growing out of a state of war, and in the degeneracy of manners and of morals engendered by both.”
Any government bureaucracy has fewer incentives to check for cases of fraud than would a private business. A private business must not only serve its customer well, but most also do so efficiently or be overtaken by competition. A government bureaucracy must neither serve its customer (i.e. citizens) nor do so efficiently as it can always tax, print, or borrow more money.
The warfare state has seen the rise of defense contractors and the influence they wield in Washington DC. Defense contractors, which had seen their best years to date during World War II, became dependent on government contracts to stay in businesses. Between the years 1960-1967 the top four military contractors (Lockheed Aircraft, General Dynamics, McDonnell Douglas, Boeing, Co) made the majority of their total sales from government sales, 88 percent, 67 percent, 75 percent, 54 percent respectively.
The defense contractors also made sure that no one, not even a president, would end their permanent place at the government’s table. During World War II, they lobbied the military to maintain the new status quo. President Truman called for an “orderly resumption of civilian production in areas where there is not manpower shortage and with materials not required for war production.” However, the Army, which was powerful and concerned with Truman’s policy having a negative effect on the war effort, joined forces with business leaders to fight reconversion.
War not only creates permanent alliances between defense contactors and the military establishment, it also changes a person’s attitudes toward his fellow man and the government. Several years after the end of World War II, Senator Robert A. Taft of Ohio addressed a crowd on subject of compulsory military training in peacetime. Maintaining a large force of Americans available for military service was not just a drain on the economy, it was a threat to our form of government. Taft warned us that,
…military training by conscription means the complete regimentation of the individual at his most formative period…If we admit that in peacetime we can deprive a man of all liberty and voice and freedom of action, if we can take him from his family and his home, then we can do the same with labor, we can order the farmer to produce and we can take over any business. If we can draft men, it is difficult to find an argument against drafting capital. Those who enthusiastically orate of retuning to free enterprise and at the same time advocate peacetime conscription are blind to the implications of this policy. They are utterly inconsistent in their position. Because of its psychological effect on every citizen, because it is the most extreme form of compulsion, military conscription will be more the test of our whole philosophy than any other policy.
The federal government never fully surrendered the powers it assumed during World War II. Some functions migrated from a wartime agency to a regular governmental department or to a newly created agency:
- When the War Production Board shut down, the newly created Civilian Production Administration absorbed some of its powers.
- The Labor Department took over the Employment Service and the Reemployment and Retraining Administration.
- The State Department took over from the Foreign Economic Administration.
- The Commerce Department assumed some of the functions previously exercised by the Smaller War Plants Corporation.
- The Office of War Mobilization and Reconversion took the responsibility for overseeing the remaining price controls form the Office of Economic Stabilization.
- The Lend-Lease program antedated the Marshall Plan, both of which would become the vast and poorly overseen foreign-aid programs.
The evidence points to a series of government actions in foreign policy that led to a ratchet effect in domestic policy. New government agencies continued war-era policies long after VE day. The growth of a domestic war machine, from conscription to defense contractors, was also newly institutionalized in America – culturally and legally. It is clear that foreign policy will affect domestic policy. Any decision to go to war or engage in limited police actions abroad must take into consideration the changes to the American economy and way of life.
 Gropman, Alan L. Mobilizing U.S. Industry in World War II. P.77. McNair Paper. Institute for National Strategic Studies, National Defense University. 1996.
 Taft, Robert A. Compulsory Military Training. Appendix to the Congressional Record. 91 Cong. Rec. A2608 1945 (emphasis added)
 Higgs, Robert, Crisis and Leviathan: Critical Episodes in the Growth of American Government. P. 226. Independent Institute. 1987.
 Industrial Mobilization For War: History of the War Production Board and Predecessor Agencies. Volume I, Program and Administration. Bureau of Demobilization. Pp. xiii-xiv
 Ibid, Pp. 18-20 https://babel.hathitrust.org/cgi/pt?id=uiug.30112041826683;view=1up;seq=36
 Higgs, Robert, Crisis and Leviathan: Critical Episodes in the Growth of American Government. P. 232. Independent Institute. 1987.
 Higgs, Robert, Depression, War, and Cold War: Studies in Political Economy. P.68. OUP. 2006.
 James Madison, Political Observations, Apr. 20, 1795 in: Letters and Other Writings of James Madison, vol. 4, p. 491 (1865)
 This is known as the ratchet effect. For the best explanation of how this works read Higgs, Robert, Crisis and Leviathan: Critical Episodes in the Growth of American Government. Independent Institute. 1987.