Disbanding Troops and Bureaucrats

There is always a great fear that there will not be enough jobs for soldiers (or bureacrats) being disbanded, as it would lead to higher unemployment. The fears of unemployment arise because people look at only one side of the process - i.e., they see soldiers (or bureacrats) flooding into the labor market without the available jobs. It is true that, when millions of people are suddenly released, it may require time for private industry to reabsorb them, but it usually does so at remarkable speeds. How does the economy reabsorb them?

Simple, the taxpayer will cease having to support the soldiers (or bureacrats) through taxes. As a result, the taxpayers will be allowed to retain the funds that were previously taken from them through taxes in order to support the troops (or bureacrats). The taxpayers will then have additional funds to buy additional goods or invest. As a result, civilian demand increases, and so does the demand for labor - it just might take a little time. The soldiers (or bureacrats) who were previously supported by civilians will become self-supporting and producing civilians themselves.

Otherwise, retaining soldiers (or bureacrats) that are no longer needed for defense or for a particular governmental service would have been sheer taxpayer waste, as each soldier (or bureacrat) would have been wholly unproductive. The taxpayers, in return for supporting the soldiers (or bureacrats), would have received nothing in return for their funds taken from them through taxes.

Remember, one of the biggest economic fallacies, committed over and over again, is ignoring the long-term, indirect consequences of a particular policy. Good economic policy analysis always means assessing a policy's impacts on all groups in the long run, rather than just the impacts on some groups in the short run.

For more on this topic, see Chapter 9 of Economics in One Lesson by Henry Hazlitt.