What if Paul Krugman’s aliens had already landed?

You have probably seen this video here, where Paul Krugman explains why the threat of an alien invasion could be a good thing. It would lead to the kind of stimulus package he wants: politicians would put their philistine concerns about the budget deficit and inflation aside, and bring on a fully-fledged fiscal and monetary bazooka.

Think of all the jobs that could be created by building anti-ballistic missiles, missile defence shields, launching pads, satellites, war planes – the possibilities are endless. And then there are the knock-on effects. All kinds of metals would have to be mined, all kinds of software to be programmed, soldiers to be trained... A space alien attack must be the ultimate Keynesian dream, so much better than mundane stuff like broken windows.

But let’s think about, for a moment, what a policy mix to fend off an alien attack could look like in practice. Presumably, we would have something like an Anti-Alien Investment Bank, channelling credit to politically favoured projects in this field. We would have EU targets, topped up by gold-plated British targets, establishing the desired composition of the anti-alien defence portfolio. These targets would be met by a complex array of direct and indirect subsidies and regulations. Government departments would hand out lavish sums to advocacy groups dedicated to ‘raising awareness’ about the dire consequences of an alien attack.

Soon enough, the anti-alien defence industry would represent a sizeable proportion of the economy. Since it would be entirely government-dependent, it would have to be surrounded by a secondary industry, the sole purpose of which would be to justify the existence of the primary industry. 

Would it be a problem for this industry if, after many years had passed and many billions had been spent, there were still no aliens in sight? Not necessarily, because by then, the rhetoric of the policy’s supporters would have subtly shifted. They would tune down the talk of imminent threat, and instead talk about how many people are employed in the industry and how many more could be. They would talk about the industry’s annual turnover and its contribution to exports and investment. They would appeal to sentiments of national prestige, pointing out how other countries were following our lead, but also how some countries had already achieved much more. Critics would be lambasted as dangerous ideologues who threatened the success of our new anti-alien economy. At that point, the policy would probably be irreversible.

Absurd, isn’t it? The idea of having entire industries built on nothing else but the defence against an imaginary threat. 

"Would it be a problem for this industry if, after many years had passed and many billions had been spent, there were still no aliens in sight?" Surely, this would be described as a measure of success of the policy! If aliens came then it proves we need more spending; if aliens do not come it proves how effective the spending was. What you say here is not just abstract, it is the reality of wartime regulation - Rent Acts (still with us after being passed in 1917, though liberalised in 1988); Exchange Control (an emergency measures for 40 years); as well as much regulation relating to pub opening hours and so on which I believe is still with us (not to mention rationing, ID cards and the anti-terrorist legislation that is used for other purposes).
A good war is always beneficial for GDP. Shows among other things what a flawed measure GDP is... Another reason for going to ZBB. I wonder what the size of the MoD would be if you started from scratch? A couple of thousand?
What about the moral justifications? What about all the lives that had been saved by that industry? Billions upon billions of human lives which would have been otherwise terminated by the Aliens. To think that the deniers who fled underground would have jeopardised the entire human population, how shameful? They became known as Hypocaust Deniers.
Rather amusingly this is the plot to Adam Roberts brilliant novel, ‘Yellow Blue Tibia’. http://www.amazon.co.uk/Yellow-Blue-Tibia-A-Novel/dp/0575083573 The only difference being the plan is conceived by Stalin in the closing days of World War II. He selects the group of Soviet science fiction writers to come up with a convincing alien invasion narrative. Stalin's belief is that this will pull the Soviet Union together against an external enemy. But circumstances change in the plan is never executed. Years later, in the 1908's, the plan suddenly appears to be coming true. An excellent book, but a monumentally stupid idea from Paul Krugman.
This is exactly what is going on with the loss of bankers profits taking the place of aliens.

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