As Israel starts a war with Iran, and the U.S. considers how deeply involved it wants to get, one lesson from history is abundantly clear. Wars cost hugely in direct physical devastation, yes, but they also have a huge hidden economic cost, in distorting the market and encouraging policymakers to seize further power and narrow the economic space in which the market can operate. War is nearly always unattractive because of its direct costs, but wise policymakers will realize that its indirect economic costs may be orders of magnitude greater and hence decide against it on every occasion in which they can do so.

Historically, this was not always the case. Before the Industrial Revolution, economic policies did not vary much from decade to decade. Wars often exhausted the borrowing capacity of both sides, raising interest rates for everybody, but that effect was normally temporary and the devastation wars wreaked was generally moderate and localized. Even the Thirty Years’ War of 1618-48, the worst before industrialization, devastated the German economy for half a century as well as killing several million people, but made no significant difference to German industrialization, because there wasn’t any.

Scientifically, there was no Dark Age following the war; the Magdeburg Hemispheres experiment to prove the strength of air pressure was invented by the Mayor of Magdeburg Otto von Guericke (1602-1686) in 1654, after that city had been subjected to the war’s worst massacre in 1631, forcing him to restore his aristocratic family’s fortunes by brewing beer. Wars then, if hard to survive individually, were very survivable intellectually and to a large extent economically. Finally, the Westphalia settlement of 1648, by establishing the principle of independent states setting their own policy behind mostly inviolable borders, generally improved upon the pre-war geopolitical situation.

The Napoleonic Wars of 1793-1815 were a different matter. For Britain, industrialization slowed during the wars, as capital became hard to come by in the difficult period of 1797-1801, while real wages declined through inflation, making labor-substituting mechanization temporarily less attractive. The Luddite riots of 1812 were caused by a re-acceleration in mechanization, putting lace-makers and other hand-workers out of a job, while real wages remained far below their level of 1792. However, by 1815 British industrialization was far ahead of its 1792 level and the economy was powering ahead, enabling the capable Chancellor of the Exchequer Nicholas Vansittart to raise £27 million in a single bond issue four days before Waterloo, an amount larger than the entire 1792 state budget and 40 times the amount raised by Napoleonic France.

In France, the Revolution was damaging enough, for example causing the Anzin coal mines, which had employed 4,000 people, to cease production as their top management was guillotined. The Directory pursued a reasonable economic policy, but bankrupted French savers with its worthless assignats. Then Napoleon arrived and put paid to further French industrial progress, cutting it off from British technological advances and providing it with free resources and captive markets by which its old-fashioned uncompetitive industries could be sustained. By 1815, France was not only bankrupt but industrially antediluvian, having fewer steam engines in its economy in 1816 (48) than the 110 Britain had deployed in 1733.

The American Civil War also had an overall economic effect far worse than its military damage. In the South, the abolition of slavery without compensation and the war’s direct damage produced an economy that was decapitalized and forced back to agrarian poverty for the next 80 years, until World War II at last produced some new industrialization. Even in the North, the enlightened and sensible moderate tariffs of the Doughface Democrats were replaced in 1861-62 by an exorbitantly high impost at average rates above 50% that raised costs and excessively protected U.S. industry. Had immigration been restricted, this would have produced a working-class Nirvana of high living standards. However, as immigration remained unrestricted, wages were kept low, so excess unearned returns went to capital, producing monopolies and grossly overstuffed “robber barons” far richer than their counterparts in other nations. This artificial exacerbation of inequality had a highly damaging effect on U.S. political attitudes, producing the bossy and regulation-crazy Progressives.

The Franco-Prussian War substantially damaged economic policy in both countries. In Germany, the free-trading free-market Zollverein that had been designed by Friedrich List was replaced by a protectionist and autarkic Prussian-dominated autocracy, which wasted protectionism’s potential for higher German living standards on a massive and eventually counterproductive military and naval build-up. In France, the economically enlightened regime of Napoleon III was replaced by a Republic that, after rejecting the sensible possibility of a Royalist Restoration in 1873, degenerated into an anti-clerical socialist mess fueled by revenge fantasies against Germany. With such poor governments, France’s relative industrial strength and living standards both fell well behind those of its European neighbors.

After 1870, even Britain suffered from its petty colonial wars. With unilateral free trade, its revenue base was inadequate to support its colonial wars and its domestic manufacturing sector was subjected to ruinous foreign dumping and thereby starved of capital. Britain’s economy therefore financialized and focused on Imperial expansion, investing scarce capital in colonial mining ventures rather than in domestic industrial innovation. Consequently by 1914, Britain had fallen industrially well behind its competitors Germany and the United States.

The economic damage done by World War I is legendary – for one thing, it unleashed the twin horrors of Communism and Nazism on the world, making World War II inevitable. It also bloated the state budgets of all participants, a bloat that was never reversed except partially in the United States during the Harding-Coolidge years. Finally, by breaking up Austria-Hungary and allowing Woodrow Wilson to draw fantasy borders for central and eastern Europe, blocking long-existing patterns of trade, it condemned that region to two decades of poverty that was followed by a further war and in most cases half a century of Communism.

In two centuries, World Wars I and II may merge in the historical memory; certainly, the economic policy damage of World War II is hard to distinguish from that of World War I. The statist pathologies of World War I were reintroduced with greater force and remained in force for longer. Certainly for Britain, whereas World War I had not done much economic policy damage beyond raising tax rates and draining foreign investments, World War II was fatal to Britain’s economic health, effectively bankrupting it. Without World War II, Britain could have kept the Empire and avoided the all-absorbing statist blob of the National Health Service.

The damage done by subsequent wars has been less, as their scale has been smaller. It has also been largely proportionate to their length; the short (4 days of full military operations) Gulf War of 1991 did little direct economic damage, though it had a fatal long-term effect in convincing the sillier policymakers around the Bush family that they could intervene militarily in the Middle East or elsewhere without being sucked into a Vietnam-style quagmire.

The folly of this was demonstrated in 2001-03 by the Afghanistan and Iraq wars, both total failures, one of which lasted almost 20 years while the other petered out after a decade, albeit leaving numerous unjustified U.S. military presences dotted round the Middle East, all of them vulnerable to another “trigger” incident.

The damage done by the recent perpetual wars has been obvious in the exploding Federal deficit and debt, and the almost complete unwillingness of even a Republican Congress to do anything significant to reduce them, as well as a long secular decline in productivity growth, almost to zero in recent years. In addition, the perpetual wars have created a foul bipartisan lobby for spending and intervention, the corruption of which was revealed recently by DOGE showing the payments that have been made to various left-wing international pressure groups, whose main purpose is to prevent healthy economic growth in emerging markets and thereby retain them as potential nexuses for future U.S. intervention.

The unhappy history of Ukraine is an example. The promising pro-market government led by Yulia Tymoshenko in 2006-10 was snuffed out, first by the Russian-backed but legitimate government led by Viktor Yanukovich and then by two Western-sponsored coups, the second of which has left the country with a perpetual Castroite dictator and another perpetual war.

The U.S. economy and its overburdened fiscal system cannot afford another era of war. Should it fail to avoid this, its future fate is shown by the pathetic and increasingly autocratic states of western Europe which have seen no economic growth since 2007 and are now overrun by leeching refugees. The supporters of war of course need the U.S. not to go bankrupt, but so long as more money can be printed and short-term government paper accepted by the market, it will not do so.

After all, there are no other countries that are better – or are there? If China fights wars, it will doubtless succumb to the economic debilities of the West, with its economy collapsing however successful its military. However, on current trends, it has no need to do so. It can simply wait for the West to destroy itself through conflict and then see its own partially capitalist economy take over what remains. After all, Sun Tzu was apocryphally clear that success goes to the most patient player, and that victory is best won without fighting a war.

Mr. President, stay out of war! U.S. economic policy is bad enough as it is!

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)