Would Our Government Really Start
a War to Try to Stimulate the Economy?
by Washington's Blog
I've written two essays attempting to
disprove "military Keynesianism" - the idea that military
spending is the best stimulus._In response, a reader challenged
me to prove that anyone would advocate military spending or war
as a fiscal stimulus.__In fact, the concept of military Keynesianism
is so widespread that there are somehalf million web pages discussing
the topic.__And many leading economists and political pundits
sing its praises.__
For example, Martin Feldstein - chairman
of the Council of Economic Advisers under President Reagan, an
economics professor at Harvard, and a member of The Wall Street
Journal's board of contributors - wrote an op-ed in the Journal
last December entitled "Defense Spending Would Be Great Stimulus"._
And as the Cato Institute notes: Bill
Kristol agrees. Noting that the military was "spending all
kinds of money already," Mr. Kristol wondered aloud, "If
you're buying 2,000 Humvees a month, why not buy 3,000? If you're
refurbishing two military bases, why not refurbish five?"__
This is not the first time that defense
spending has been endorsed as a way to jump-start the economy.
Nearly five decades ago, economic advisers to President Kennedy
urged him to increase military spending as an economic stimulus...
Similar arguments are heard today. The
members of Connecticut's congressional delegation have been particularly
outspoken in their support for the Virginia-class submarine, and
they haven't been shy about pointing to the jobs that the program
provides in their home state. The Marine Corps' V-22 Osprey program
wins support on similar grounds. Despite serious concerns about
crew safety and comfort, the V-22 program employs workers in Pennsylvania,
New Jersey, Delaware and Texas, and a number of other states.
Professors of political economy Jonathan
Nitzan and Shimshon Bichler write:
Theories of Military Keynesianism and
the Military-Industrial Complex became popular after the Second
World War, and perhaps for a good reason. The prospect of military
demobilization, particularly in the United States, seemed alarming.
The U.S. elite remembered vividly how soaring military spending
had pulled the world out of the Great Depression, and it feared
that falling military budgets would reverse this process. If that
were to happen, the expectation was that business would tumble,unemployment
would soar, and the legitimacy of free-market capitalism would
again be called into question.__Seeking to avert this prospect,
in 1950 the U.S. National Security Council drafted a top-secret
document, NSC-68. The document, which was declassified only in
1977, explicitly called on the government to use higher military
spending as a way of preventing such an outcome.
_Are they right about NSC-68?__Well, PhD
economist Robert Higgs confirms the importance of NSC-68:
Previously administration officials had
encountered stiff resistance from Congress to their pleas for
a substantial buildup along the lines laid out in NSC-68, a landmark
document of April 1950. The authors of this internal government
report took a Manichaean view of America's rivalry with the Soviet
Union, espoused a permanent role for the United States as world
policeman, and envisioned U.S. military expenditures amounting
to perhaps 20 percent of GNP. But congressional acceptance of
the recommended measures seemed highly unlikely in the absence
of a crisis. In 1950 "the fear that [the North Korean] invasion
was just the first step in a broad offensive by the Soviets proved
highly useful when it came to persuading Congress to increase
the defense budget." As Secretary of State Dean Acheson said
afterwards, "Korea saved us." The buildup reached its
peak in 1953, when the stalemated belligerents in Korea agreed
to a truce.
And Chalmers Johnson - Professor emeritus
of the University of California, San Diego, and former CIA consultant
This is military Keynesianism - the determination
to maintain a permanent war economy and to treat military output
as an ordinary economic product, even though it makes no contribution
to either production or consumption.
This ideology goes back to the first years
of the cold war. During the late 1940s, the US was haunted by
economic anxieties. The great depression of the 1930s had been
overcome only by the war production boom of the second world war.
With peace and demobilisation, there was a pervasive fear that
the depression would return. During 1949, alarmed by the Soviet
Union's detonation of an atomic bomb, the looming Communist victory
in the Chinese civil war, a domestic recession, and the lowering
of the Iron Curtain around the USSR's European satellites, the
US sought to draft basic strategy for the emerging cold war. The
result was the militaristic National Security Council Report 68
(NSC-68) drafted under the supervision of Paul Nitze, then head
of the Policy Planning Staff in the State Department. Dated 14
April 1950 and signed by President Harry S Truman on 30 September
1950, it laid out the basic public economic policies that the
US pursues to the present day.
In its conclusions, NSC-68 asserted: "One
of the most significant lessons of our World War II experience
was that the American economy, when it operates at a level approaching
full efficiency, can provide enormous resources for purposes other
than civilian consumption while simultaneously providing a high
standard of living".
With this understanding, US strategists
began to build up a massive munitions industry, both to counter
the military might of the Soviet Union (which they consistently
overstated) and also to maintain full employment, as well as ward
off a possible return of the depression. The result was that,
under Pentagon leadership, entire new industries were created
to manufacture large aircraft, nuclear-powered submarines, nuclear
warheads, intercontinental ballistic missiles, and surveillance
and communications satellites. This led to what President Eisenhower
warned against in his farewell address of 6 February 1961: "The
conjunction of an immense military establishment and a large arms
industry is new in the American experience" - the military-industrial
By 1990 the value of the weapons, equipment
and factories devoted to the Department of Defense was 83% of
the value of all plants and equipment in US manufacturing. From
1947 to 1990, the combined US military budgets amounted to $8.7
trillion. Even though the Soviet Union no longer exists, US reliance
on military Keynesianism has, if anything, ratcheted up, thanks
to the massive vested interests that have become entrenched around
the military establishment.
You can read NSC-68 here.__Leading political
journalist John T. Flynn wrote in 1944 :
Militarism is the one great glamorous
public-works project upon which a variety of elements in the community
can be brought into agreement.
But Flynn warned that:
Inevitably, having surrendered to militarism
as an economic device, we will do what other countries have done:
we will keep alive the fears of our people of the aggressive ambitions
of other countries and we will ourselves embark upon imperialistic
enterprises of our own.
Indeed, the creator of the theory of military
Keynesianism himself warned that those who followed such thinking
would fearmonger, appeal to patriotism and get us into wars in
order to promote this kind of economic "stimulus". As
The Independent wrote in 2004:
Military-fuelled growth, or military
Keynesianism as it is now known in academic circles, was first
theorised by the Polish economist Michal Kalecki in 1943. Kalecki
argued that capitalists and their political champions tended to
bridle against classic Keynesianism; achieving full employment
through public spending made them nervous because it risked over-empowering
the working class and the unions.
The military was a much more desirable
investment from their point of view, although justifying such
a diversion of public funds required a certain degree of political
repression, best achieved through appeals to patriotism and fear-mongering
about an enemy threat - and,inexorably, an actual war.
At the time, Kalecki's best example of
military Keynesianism was Nazi Germany. But the concept does not
just operate under fascist dictatorships. Indeed, it has been
taken up with enthusiasm by the neo-liberal right wing in the
I disagree that this is a partisan issue.
The Independent piece portrays the "neo-liberal right"
as special warmongers; I don't believe there is much difference
with the "neo-liberal left", or "neo-conservative
right", or whatever. Indeed, political labels are fairly
meaningless. What is important is the actions one takes, not his
rhetoric about his actions.
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