Yves here. William Hartung takes aim at the regular arms contractor claim, now a pet message of President Biden, that war spending helps the economy. Mind you, this assertion might not be as inaccurate as it is in the current US context if our arms contractors were not primarily in the pork business and the government engaged in more basic research with the potential for broader social uses, as it formerly did (see Mariana Mazzucato for details).
By <William D. Hartung. Originally published at TomDispatch
Joe Biden wants you to believe that spending money on weapons is good for the economy. That tired old myth — regularly repeated by the political leaders of both parties — could help create an even more militarized economy that could threaten our peace and prosperity for decades to come. Any short-term gains from pumping in more arms spending will be more than offset by the long-term damage caused by crowding out new industries and innovations, while vacuuming up funds needed to address other urgent national priorities.
The Biden administration’s sales pitch for the purported benefits of military outlays began in earnest last October, when the president gave a rare Oval Office address to promote a $106-billion emergency allocation that included tens of billions of dollars of weaponry for Ukraine, Israel, and Taiwan. MAGA Republicans in Congress had been blocking the funding from going forward and the White House was searching for a new argument to win them over. The president and his advisers settled on an answer that could just as easily have come out of the mouth of Donald Trump: jobs, jobs, jobs. As Joe Biden put it:
“We send Ukraine equipment sitting in our stockpiles. And when we use the money allocated by Congress, we use it to replenish our own stores… equipment that defends America and is made in America: Patriot missiles for air defense batteries made in Arizona; artillery shells manufactured in 12 states across the country — in Pennsylvania, Ohio, Texas; and so much more.”
It should be noted that two of the four states he singled out (Arizona and Pennsylvania) are swing states crucial to his reelection bid, while the other two are red states with Republican senators he’s been trying to win over to vote for another round of military aid to Ukraine.
Lest you think that Biden’s economic pitch for such aid was a one-off event, Politico reported that, in the wake of his Oval Office speech, administration officials were distributing talking points to members of Congress touting the economic benefits of such aid. Politico dubbed this approach “Bombenomics.” Lobbyists for the administration even handed out a map purporting to show how much money such assistance to Ukraine would distribute to each of the 50 states. And that, by the way, is a tactic companies like Lockheed Martin routinely use to promote the continued funding of costly, flawed weapons systems like the F-35 fighter jet. Still, it should be troubling to see the White House stooping to the same tactics.
Yes, it’s important to provide Ukraine with the necessary equipment and munitions to defend itself from Russia’s grim invasion, but the case should be made on the merits, not through exaggerated accounts about the economic impact of doing so. Otherwise, the military-industrial complex will have yet another never-ending claim on our scarce national resources.
Military Keynesianism and Cold War Fallacies
The official story about military spending and the economy starts like this: the massive buildup for World War II got America out of the Great Depression, sparked the development of key civilian technologies (from computers to the internet), and created a steady flow of well-paying manufacturing jobs that were part of the backbone of America’s industrial economy.
There is indeed a grain of truth in each of those assertions, but they all ignore one key fact: the opportunity costs of throwing endless trillions of dollars at the military means far less is invested in other crucial American needs, ranging from housing and education to public health and environmental protection. Yes, military spending did indeed help America recover from the Great Depression but not because it was military spending. It helped because it was spending, period. Any kind of spending at the levels devoted to fighting World War II would have revived the economy. While in that era, such military spending was certainly a necessity, today similar spending is more a question of (corporate) politics and priorities than of economics.
In these years Pentagon spending has soared and the defense budget continues to head toward an annual trillion-dollar mark, while the prospects of tens of millions of Americans have plummeted. More than 140 million of us now fall into poor or low-income categories, including one out of every six children. More than 44 million of us suffer from hunger in any given year. An estimated 183,000 Americans died of poverty-related causes in 2019, more than from homicide, gun violence, diabetes, or obesity. Meanwhile, ever more Americans are living on the streets or in shelters as homeless people hit a record 650,000 in 2022.
Perhaps most shockingly, the United States now has the lowest life expectancy of any industrialized country, even as the International Institute for Strategic Studies reports that it now accounts for 40% of the world’s — yes, the whole world’s! — military spending. That’s four times more than its closest rival, China. In fact, it’s more than the next 15 countries combined, many of which are U.S. allies. It’s long past time for a reckoning about what kinds of investments truly make Americans safe and economically secure — a bloated military budget or those aimed at meeting people’s basic needs.
What will it take to get Washington to invest in addressing non-military needs at the levels routinely lavished on the Pentagon? For that, we would need presidential leadership and a new, more forward-looking Congress. That’s a tough, long-term goal to reach, but well worth pursuing. If a shift in budget priorities were to be implemented in Washington, the resulting spending could, for instance, create anywhere from 9% more jobs for wind and solar energy production to three times as many jobs in education.
As for the much-touted spinoffs from military research, investing directly in civilian activities rather than relying on a spillover from Pentagon spending would produce significantly more useful technologies far more quickly. In fact, for the past few decades, the civilian sector of the economy has been far nimbler and more innovative than Pentagon-funded initiatives, so — don’t be surprised — military spinoffs have greatly diminished. Instead, the Pentagon is desperately seeking to lure high-tech companies and talent back into its orbit, a gambit which, if successful, is likely to undermine the nation’s ability to create useful products that could push the civilian sector forward. Companies and workers who might otherwise be involved in developing vaccines, producing environmentally friendly technologies, or finding new sources of green energy will instead be put to work building a new generation of deadly weapons.
Diminishing Returns
In recent years, the Pentagon budget has approached its highest level since World War II: $886 billion and counting. That’s hundreds of billions more than was spent in the peak year of the Vietnam War or at the height of the Cold War. Nonetheless, the actual number of jobs in weapons manufacturing has plummeted dramatically from three million in the mid-1980s to 1.1 million now. Of course, a million jobs is nothing to sneeze at, but the downward trend in arms-related employment is likely to continue as automation and outsourcing grow. The process of reducing arms industry jobs will be accelerated by a greater reliance on software over hardware in the development of new weapons systems that incorporate artificial intelligence. Given the focus on emerging technologies, assembly line jobs will be reduced, while the number of scientists and engineers involved in weapons-related work will only grow.
In addition, as the journalist Taylor Barnes has pointed out, the arms industry jobs that do remain are likely to pay significantly less than in the past, as unionization rates at the major contractors continue to fall precipitously, while two-tier union contracts deny incoming workers the kind of pay and benefits their predecessors enjoyed. To cite two examples: in 1971, 69% of Lockheed Martin workers were unionized, while in 2022 that number was 19%; at Northrop Grumman today, a mere 4% of its employees are unionized. The very idea that weapons production provides high-paying manufacturing jobs with good benefits is rapidly becoming a thing of the past.
More and better-paying jobs could be created by directing more spending to domestic needs, but that would require a dramatic change in the politics and composition of Congress.
The Military Is Not an “Anti-Poverty Program”
Members of Congress and the Washington elite continue to argue that the U.S. military is this country’s most effective anti-poverty program. While the pay, benefits, training, and educational funding available to members of that military have certainly helped some of them improve their lot, that’s hardly the full picture. The potential downside of military service puts the value of any financial benefits in grim perspective.
Many veterans of America’s disastrous post-9/11 wars, after all, risked their physical and mental health, not to speak of their lives, during their time in the military. After all, 40% of veterans of the Iraq and Afghan wars have reported service-related disabilities. Physical and mental health problems suffered by veterans range from lost limbs to traumatic brain injuries to post-traumatic stress syndrome (PTSD). They have also been at greater risk of homelessness than the population as a whole. Most tragically, four times as many veterans have committed suicide as the number of military personnel killed by enemy forces in any of the U.S. wars of this century.
The toll of such disastrous conflicts on veterans is one of many reasons that war should be the exception, not the rule, in U.S. foreign policy.
And in that context, there can be little doubt that the best way to fight poverty is by doing so directly, not as a side-effect of building an increasingly militarized society. If, to get a leg up in life, people need education and training, it should be provided to civilians and veterans alike.
Tradeoffs
Federal efforts to address the problems outlined above have been hamstrung by a combination of overspending on the Pentagon and the unwillingness of Congress to more seriously tax wealthy Americans to address poverty and inequality. (After all, the wealthiest 1% of us are now cumulatively worth more than the 291 million of us in the “bottom” 90%, which represents a massive redistribution of wealth in the last half-century.)
The tradeoffs are stark. The Pentagon’s annual budget is significantly more than 20 times the $37 billion the government now invests annually in reducing greenhouse gas emissions as part of the Inflation Reduction Act. Meanwhile, spending on weapons production and research alone is more than eight times as high. The Pentagon puts out more each year for one combat aircraft — the overpriced, underperforming F-35 — than the entire budget of the Centers for Disease Control and Prevention. Meanwhile, one $13 billion aircraft carrier costs more to produce than the annual budget of the Environmental Protection Agency. Similarly, in 2020, Lockheed Martin alone received $75 billion in federal contracts and that’s more than the budgets of the State Department and the Agency for International Development combined. In other words, the sum total of that company’s annual contracts adds up to the equivalent of the entire U.S. budget for diplomacy.
Simply shifting funds from the Pentagon to domestic programs wouldn’t, of course, be a magical solution to all of America’s economic problems. Just to achieve such a shift in the first place would, of course, be a major political undertaking and the funds being shifted would have to be spent effectively. Furthermore, even cutting the Pentagon budget in half wouldn’t be enough to take into account all of this country’s unmet needs. That would require a comprehensive package, including not just a change in budget priorities but an increase in federal revenues and a crackdown on waste, fraud, and abuse in the outlay of government loans and grants. It would also require the kind of attention and focus now reserved for planning to fund the military.
One comprehensive plan for remaking the economy to better serve all Americans is the moral budget of the Poor People’s Campaign, a national movement of low-income people inspired by the 1968 initiative of the same name spearheaded by the Reverend Martin Luther King, Jr., before his assassination that April 4th. Its central issues are promoting racial justice, ending poverty, opposing militarism, and supporting environmental restoration. Its moral budget proposes investing more than $1.2 trillion in domestic needs, drawn from both cuts to Pentagon spending and increases in tax revenues from wealthy individuals and corporations. Achieving such a shift in American priorities is, at best, undoubtedly a long-term undertaking, but it does offer a better path forward than continuing to neglect basic needs to feed the war machine.
If current trends continue, the military economy will only keep on growing at the expense of so much else we need as a society, exacerbating inequality, stifling innovation, and perpetuating a policy of endless war. We can’t allow the illusion — and it is an illusion! — of military-fueled prosperity to allow us to neglect the needs of tens of millions of people or to hinder our ability to envision the kind of world we want to build for future generations. The next time you hear a politician, a Pentagon bureaucrat, or a corporate functionary tell you about the economic wonders of massive military budgets, don’t buy the hype.
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I’m surprised Hartung didn’t mention Keynes’s “multiplier effect.” When a government spends into an economy on the domestic side, the products and services produced then circulate around the economy and produce a multiplier effect. You get more than $100 of economic stimulus for every $100 of government spending. That is not the case for defense spending where the “products” do not circulate and do not have a multiplier effect.
I learned about this 50 years ago in a college econ course, but these days, who hears about Keynes?
“That tired old myth” sums up the point. Reagan and Shrub, especially, peddled this nonsense. Biden is in reelection mode, and it’s fairly clear they are going to Reagan and Clinton play books. Whether he believes it or not is a point to debate, but the nonsense has been there.
The book appears interesting. High rates of unionization kept defense industries in certain good graces, but things have gone haywire since 9/11. The permanent war propaganda footing has kept it seems on the front of page. Some of these numbers are eye popping to me. They were bad before the Sainted One, but they are incomprehensible now. The cost of war people were fairly prominent in the blogosphere once upon a time, and things are simply worse. Even part of the reason for the relative quality of the first Iron Man film is it addressed the cost of war. The bad guy was an arms manufacturer.
Military spending does have a multiplier effect: this results from the income paid to those producing military goods, which they then at least partially respend. In fact, military spending has the “benefit,” for those economies chronically suffering from insufficient demand, of providing income without any goods becoming available to satisfy consumer needs. Military spending also has the benefit, for those who oppose government spending generally, of not providing goods or services that compete with the private sector.
Very little of the “private sector” is feeding at the military funding trough. The “multiplier effect” reaches more regular businesses than Pentagon funding.
I believe the u.s. economy has a very different structure from the kind of economy Keynes theorized about. As David comments below, Friday Harbor February 26, 2024 at 10:55 am, u.s. spending by governments, industry, and even u.s. consumers has much less multiplier effect on the u.s. economy than it had back in the day when the u.s. had industry and employed American labor.
I believe such multiplier effects as there are today are further diluted by the way each dollar spent is divided between Labor and Corporate profits and ‘overhead’ costs related to management burden. Money in the hands of Labor does circulate and multiply through consumer spending but how much of each dollar spent is siphoned off to handsomely reward management or pay dividends. The wealthy, and very wealthy spend little into consumption to grow the economy but they do spend to buy stocks and real property and drive up their prices.
Keynes discussed the benefits of spending government to employ the unemployed at an unproductive task like digging holes and filling them again. Each dollar paid to that unemployed person will be spent to buy food, clothing, shelter, and perhaps pay for a few amenities and after a while a little savings. Much spending on the military and weapons is less than unproductive and little of it finds its way into building the economy of today’s u.s.
Yes the multiplier, I remember those lectures where the multiplier was assumed to be 4 and every dollar of spending let to four dollars of growth. The only moderating factor would be inflation and associated changes to interest rates which throttled the economy down.
The average fiscal deficit since 2000 has been $1.1 trillion or about 5% of GDP and that should mean growth of astronomic levels. But alas, economic growth during the same period has averaged 2.1%. I wonder how those lectures would have went if the professor told us that for every $1 in deficit spending the economy will grow by about 40 cents.
War is Bad for You- And the Economy
Oh I don’t know…
If I’m a member of the Think Tank Class, our political “leaders” and all, it’s pretty good. My kids aren’t getting killed. Doesn’t work out in Iraq, Afghanistan, Ukraine, oh well. Let’s try Taiwan/China, Yemen, Syria. I have noticed Biden and all are trotting out the domino theory that if Ukraine falls to Russia then Europe is next. Pardon the sarcasm in some of those words.
No matter how much common sense is in this article, I think the only way any of these stains on humanity will learn otherwise is when the missiles start raining down on US cities.
As the dollar Reserve currency slowly erodes, Americans will learn what an economic bomb looks like: social chaos.
In thinking about this subject, I am always reminded of what George Orwell wrote about the economy of the “1984” world. The core idea was ‘The primary aim of modern warfare is to use up the products of the machine without raising the general standard of living.’ Below is a link to this passage and it is only a short read and very much worth thinking about. And when you come to mention of the ‘Floating Fortress’, think about the modern super aircraft carrier-
https://akamat.wordpress.com/2007/07/31/the-purpose-of-war-according-to-george-orwell-1984/
I believe that about two million people work for the arms industry in the US which is not a massive amount. But because of the MIC, you now have Europe wanting to turn itself into a massive arms industry instead of a regular economy and countries like Australia are slowly going down this path as well. We will flood this planet full of weapons.
US defense or military spending has now climbed beyond $1 trillion yearly. Defense spending is now $1,021.8 trillion yearly and climbing fast:
https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categories=survey#eyJhcHBpZCI6MTksInN0ZXBzIjpbMSwyLDNdLCJkYXRhIjpbWyJjYXRlZ29yaWVzIiwiU3VydmV5Il0sWyJOSVBBX1RhYmxlX0xpc3QiLCI1Il1dfQ==
January 25, 2024
Defense spending was 56.1% of federal government consumption and investment in October through December 2023 *
$1,021.8 / $1,819.8 = 56.1%
* Billions of dollars
Remember, too, that the US began to cancel arms control treaties in December 2001, and never stopped cancelling. US nuclear weapons spending will be $756 billion over the coming decade:
https://www.cbo.gov/publication/59365
July, 2023
Projected Costs of U.S. Nuclear Forces, 2023 to 2032
The Congressional Budget Office updates its projections of the 10-year costs of U.S. nuclear forces every two years. This report contains CBO’s projections for the 2023–2032 period.
If carried out, the plans for nuclear forces
delineated in the Department of Defense’s (DoD’s) and the Department of Energy’s (DOE’s) fiscal year 2023 budget requests, submitted in April 2022, would cost a total of $756 billion over the 2023–2032 period, or an average of just over $75 billion a year, CBO estimates…
Wasn’t the military Keynesianism of the 1910s and 1940s ‘successful’ because it was, in reality, a massive transfer of capital from Europe (and especially the UK) to the US, with the US becoming about the greatest war profiteer in history in the process?
In 1944 the US (Morgenthau and White) vetoed Keynes’s proposals for a clearing union and bancor because the US did not wish to cede or restore that which it had acquired from Europe during the war. Armed with seemingly impregnable surpluses, the US could then function as the sheet anchor of the gold exchange system of semi-fixed exchange rate parities. However, military Keynesianism had acquired its own momentum. The less able a heavily indebted Britain or (to a lesser extent) France could act as local policemen, the more the US had to step into the breach. Military spending overseas steadily reduced current account surpluses, and transformed them into deficits after about 1959 (soon after full convertibility in 1958). This enabled France, Japan and West Germany to become creditors of the US. By 1965 France was demanding repayment of US liabilities in specie. The Bretton Woods system collapsed soon after. During the 1960s Kennedy and LBJ spent about as much time chewing over the ‘dollar problem’ (i.e., the drain of specie and the growing unsustainability of the $35/troy oz. link) as they did over Vietnam. This was a serious blow to the postwar strategic architecture of the US, and this process caused deep resentment in certain quarters within Washington.
One of the main reasons why the surplus of 1944-45 disappeared so quickly was that many western European states steadfastly refused to pay the full cost of their own defence and when they did (as with the UK), it caused chronic exchange rate problems which compromised their growth potential. The US covered the entire cost of France’s failed intervention in Indo-China. France vetoed its own proposals for a European defence community in 1954, and other attempts (such as the phantom Western [European] Union) were mere strategic architecture, US governments were painfully aware of the dangers which this drain posed to US strategic interests, but the pleas of the Treasury, Commerce and Agriculture departments were continually overridden by the State department, which had the ear of the White House in relation to this question: a textbook case of the dangers of giving diplomats greater influence than officials within economic ministries. Attempts to press for increased European defence spending continued into the 1970s, to scant avail, as European countries were seared by the inflation of the time (and, of course, defence spending is also inflationary).
As I see it, the coincidence of the IRA *and* the resurgence of military Keynesianism is partly about payback. It is about extracting from Europe the capital which bled away from the US during the 1950s, 1960s and 1970s, which in turn was capital which the US had bled from Europe between the 1910s and 1940s. Under this new dispensation Europe loses access to cheap inputs *and* markets, whilst it must also pay more to parasitical defence contractors, often based in the US, in order to defend itself against a real or imagined ‘enemy’. This entails a reversal of the peace dividend of 1989-91, with increased austerity (i.e., stinting on investment) to finance that reversal. Yet this risks the destruction of the very strategic prospectus which the US is attempting to advance, as reversing the peace dividend whilst Europe’s economic prospects disintegrate. This is a recipe for zero sum game politics both within and between European states. Having broken Europe, it now questionable whether there is any way back for Europe other than as an economic vent for the US or (if Europe rebels against US tutelage once it realises the enormity of what has been done to it) as an adjunct to Eurasia. For it is Europe’s (specifically France’s) loss of Africa, and the evaporation of its influence in West Asia, which will be most decisive in its potentially irreversible reduction to the status of an economic backwater (Europe’s prosperity over the last five centuries being predicated on its ready access to heavily discounted inputs from the Global South). I am not sure that US policymakers know, or care, what they have managed to accomplish, and the extent to which the economic and strategic reduction of Europe may compromise their own claims to continuing ‘hegemony’.
Thank you, lots to process.
I also wish Prof. Michael Hudson would weigh in on this topic.
What military Keynesianism did the u.s. practice from 1910 – 1939? The u.s. government made loans to Europe, principally to Great Britain, France, Italy, and Belgium, during and following World War I. The loans paid for war materiel and food. After the war the u.s. pressed Europe to repay the loans. Europe pressed on Germany for reparations in part so it could use those reparations to repay the u.s. loans. [Keynes was not a fan of this whole business.] I am not sure how you can call this military Keynesianism.
The New Deal toyed with Keynesian during the Great Depression while hindered by the Supreme Court and pressures to return to the balanced-book frugal-household economic policies that characterized the Hoover Administration. World War II spending built u.s. Industrial productive capital, put America back to work, and resulted in many new inventions that benefited post war industry. But World War II spending focused on winning the war, not on stimulating the economy except as a by-product. Post-War there were concerns that the economy would slow down again once the pent-up spending from the shortages and rationing during the war played out as consumers began spending the money they had saved during the war’s austerity. Again I am not sure how you can call the spending during World War II military Keynesianism.
I believe the Marshall Plan and Bretton Woods were devoted to the u.s. asserting control over world economies. As Europe recovered from the destruction of World War II, the u.s. went around sewing up economic control over the many loosely held European colonies and colonial interests which came up for grabs.
“As I see it, the coincidence of the IRA *and* the resurgence of military Keynesianism is partly about payback. It is about extracting from Europe the capital which bled away from the US during the 1950s, 1960s and 1970s, which in turn was capital which the US had bled from Europe between the 1910s and 1940s.”
What capital was bled from the u.s. from the 1950s, 1960s and 1970s? The u.s. lived fat from Bretton Woods positioning the dollar as “the world’s foremost reserve currency” replacing the British pound. After World War II much of the productive capital in Europe and Japan had been reduced to rubble, leaving the u.s. as the preeminent Industrial economic power.
Your conjecture about the IRA *and* resurgence of military Keynesianism is strange. I view the IRA’s buy American clauses as a salve to suggest some effort or intent to rebuild u.s. Industry. The spending so far looks to me more like window dressing to cover a giveaway to Corporate interests in Silicon Valley with some local money spread around to suitable areas where voters need some special attention. The u.s. military spending has been painted to appear as a Keynesian stimulus to the economy. Paint it whatever color Biden might like and it still looks like a big giveaway to the MICIMATT [Military-Industrial-Congressional-Intelligence-Media-Academia-Think-Tank]. Such limited Keynesian as the spending produces echoes the give a little the CARES Act provided to rent and bill-paying consumers while passing trillions to the Fed for the care and feeding of the u.s. Financial Industrial Complex.
As I recall Michael Hudson persuasively argued that “the economic and strategic reduction of Europe” as you put it, was the chief aim of the u.s. war in Ukraine. I think the u.s. policymakers know and very much care what they have managed to accomplish in this regard. I believe the reduction of Europe bolsters u.s. ‘hegemony’ over Europe. The damage done to u.s. ‘hegemony’ over the rest of the world, and the horrendous damage done to u.s. reputation as a Imperial leader and as a prime vendor of quality weapons, military intelligence, strategy and tactics, and the damage to the u.s. as reputation as a premier economic power, is the consequence of the remarkable incompetence and stupidity of u.s. foreign policy especially the most recent extravagantly incompetent and stupid foreign policy of the Biden administration.
Thank you very much indeed. I suppose ‘military Keynesianism’ has become a fashionable phrase recently, but perhaps it emerged with full force in 1945-46. It was then seen how massive military appropriations (financed in large measure by European capital) had eliminated most unemployment and brought considerable prosperity to those states which benefited from it. At the end of the war there was grave concern about rising inflation (following the elimination of price controls) and, more especially, a resurgence of unemployment as demand for armaments slumped. It is from that moment that US policy towards the UK’s policy goals (which had been significantly antipathetic during the lend-lease agreements) became significantly more antipathetic during the discussions over the 1946 dollar loan, which led straight to the ‘financial Dunkirk’ of 1947. This also coincided with the formation of the ‘garrison state’ and ‘security state’, and with the breakdown of US-Soviet relations, which was a spur to further military spending. In addition, it coincided with a rapid decline in the fortunes of the Democratic party. Increased spending in sensitive areas, most especially the putative Dixiecrat South, was seen as electorally imperative. From the vantage point of 1946, and in the perhaps distorting rear view mirror, continuing the heavy spending of 1940-45 offered a panacea to the Truman Administration, which would absorb surplus capital, reduce the risk of unemployment (especially as many service personnel returned home) and buy support in the South. Marshall aid was intended to revive the purchasing power of European consumers so that Europe could function as a permanent vent to US manufacturing surpluses, and so prevent a relapse into Depression – those surpluses having been identified as a root cause of the slump.
As to the 1950s and 1960s, I agree that the US was in a uniquely privileged position as the lodestar of Bretton Woods, but US military spending overseas was a debit to current account. Initially, the debit would be offset if the countries which hosted US personnel and materiel purchased US manufactures. However, this gradually ceased to happen as Germany and Japan resurrected their industrial capacity, and then discriminated against US imports. Thus the vast surpluses the US enjoyed in the 1950s gradually turned into deficits after about 1960. The UK experienced much the same problem: its overseas spending on the military and under the Colonial Development Acts weighed on its current account position, and helped lead to recurrent sterling crises. Both the US and the UK increasingly came to resent this development. The UK used its increasing relative economic weakness as an excuse for reducing overseas commitments, often to the distress and anger of US policymakers who realised that they would have to pick up the tab, to the disadvantage of their current account. These resentments increased over time. I therefore believe that at least part of current US policy towards Europe is informed, if not consciously, then subliminally, by long pent-up resentments about real or imagined free riding by Europeans on the US defence shield. Yet by trying to turn Europe back into a vent for US manufactures and energy supplies, the US risks reducing European purchasing power to the extent that it may be forced to reconsider its loyalties: this then may defeat the ostensible purpose of US policy.
Yes, I agree with you strongly, that the IRA is being painted as a revival of 1940s-style policies, when in fact it is much more likely to be a large giveaway to politically privileged sectors. In this sense alone, it perhaps has echoes of FDR and Truman trying to buy the loyalty of the South and enough of the West to maintain congressional majorities.
I agree completely with all your other remarks. Thank you!
This is an excellent analysis.
Indeed, if wealth stops being siphoned from Russia, Asia, and Africa, what will Europe, and in general the West do? especially since the fundamentals have been broken, due to excessive individualism, idpolism, and shallow education pursuits. And deindustrialization. And financialization.
William Hartung provides a valid argument for reducing or redirecting funds from the MIC to other areas, yet, it seems he relies on two false assumptions: that the DP can be reformed to address different priorities and the Biden regime can be persuaded to change course; I doubt that’s possible.
The only candidate explicitly promising to do the things Hartung stresses is Independent RFK, Jr., who has also emphasized that the prez has more power to impact the military budget than say create M4A.
The acceptance of the dominance of both major political parties is remarkable considering how out of step they are with most Americans, the inadequacy are Biden and Trump, as well as so many members of Congress.
Political change is nothing new. The Whig Party, a major political party, collapsed in the 1850s and what emerged was the Republican Party that, within a decade, put Abe Lincoln in the White House. If there is no clear path to reform the DP and the DP can’t do better than nominate a candidate complicit in genocide, perhaps a new party is in order.
Yes, I agree with Hartung’s basic points but he seems a bit naive and ivory-tower in that regard: The US is an oligarchy and has no functioning democracy – it is simply impossible for the JB regime to “reform” anything when BOTH parties are pushing for MORE money to Israel etc.. The institutions of power are fully corrupted: RFK aint gonna be a savior either. Sorry to be negative, but the evidence is clear.
I’m not expecting a savior. However, among the current choices within the dysfunctional two parties, which have been dysfunctional for decades and with no sign of changing, I think Kennedy is the best alternative to turn the ship around.
The author makes some fair points , but characteristically conflates a defence budget with equipment spending, equipment spending with the “arms budget” and the “arms budget” with the new procurement of extremely expensive non-performing platforms like the F35.
If you accept that all government spending is a form of demand which can potentially help the economy (and that has itself been a controversial argument in recent decades) then a great deal of research shows that spending on defence equipment is a very inefficient way of stimulating the economy, because the defence industry is a very high value-added business, employing relatively skilled workers. However, what’s called the “crowding-out” hypothesis assumes that there is a real (as opposed to theoretical) demand for such workers and resources elsewhere in the economy, and in the West, for the most part, this is simply not true. In many European countries, the defence industry is the only large-scale employer of skilled and educated manpower in certain areas, so much of the rest having been offshored.
The actual consequences of defence spending, which again have been much studied, show a much more nuanced picture. For example, an F35 airbase is a major economic actor, providing lots of jobs and economic demand in the local community. But the base itself will buy all sorts of other, much lower-tech items, including civilian vehicles, POL, food and drinks, and everything for the life-support of the hundreds or thousands of people who work there, including maintaining buildings and roads and supplying power and other utilities. This was shown by studies of the end of conscription in Europe, where entire local communities were devastated by the closure of military bases and the loss of their main economic actor. Likewise, the garment industry, used to manufacturing millions of uniforms per year, was in crisis.
But it’s important not to confuse the argument that it would be theoretically better to spend some of the money on other things with the argument that therefore defence spending should be cut. In an ideal world, some of the money going to defence (and as I have pointed out only a small proportion goes on expensive new equipment) could be redirected to other needy areas and produce better effects for the economy. But everybody knows that in practice this is not going to happen, and indeed it hasn’t. After the Cold War, when defence budgets were reduced, left-wing economists were talking about “conversion”, and right-wing economists were talking about “freeing-up” resources for “more productive” investment elsewhere. But neither happened, because the interest in the private sector wasn’t there, and the skilled workforces and the factories disappeared rapidly. There’s no reason to suppose it would be different now.
The author argues that the enormous increase in military spending after 1941 didn’t help the US out of the Depression, because theoretically, the same amount of investment in other areas might have had a more beneficial effect on the economy. That’s a curious argument in itself, but it also ignores the obvious point that the vast majority of this spending didn’t go into high-tech weaponry, but rather, especially at the start, into taking people out of unemployment, paying them, housing and feeding them, and supplying them with uniforms, personal equipment and vehicles, thus restarting demand in various civilian sectors. The same process was observed in Germany after 1936 with the reintroduction of conscription.
So yes, defence spending is an objectively inefficient way of stimulating the economy, and it would be nice if some of the money could theoretically be spent in other ways. But as western states have been finding since Covid, they largely lack the education, training, organisation and capacity to do this, so the alternatives in practice will indeed be theoretical, apart from one obvious use of the money: more tax cuts for the rich.
There may also be a causation/correlation problem. The period of military Keynesianism coincided with a number of the major innovations of the second quarter of the 20th century coming into the market. As Robert Gordon has noted, these innovations were of a kind that their impact upon productivity and, with it, living standards were both rapid and profound. This coincidence has led many to assert that the prosperity of the 1950s and 1960s can be revived upon the back of a ‘warfare state’ (David Edgerton’s phrase), and that a warfare state can finance a welfare state.
However, by the mid/late 1960s these rapid gains were being spent quickly. As Gordon has noted, the ‘low hanging fruit’ had been plucked and devoured, and there were few transformative gains which would replace the gains which had already been achieved. As the postwar gains were spent, so distributive contests emerged within Western societies, which not only spent the gains that much more quickly (eventually at the risk of profit shares), but also led to a capitalist backlash during the 1970s. And it was during the 1970s that even Western European defence spending began its remorseless decline from between 4-5% of GDP to present levels. Higher levels of defence spending could simply not be afforded by stagnating economies without rising social tensions.
Not trying to detract
“and the skilled workforces and the factories disappeared rapidly” – The factories disappeared but skilled workforces were dispersed.
“But as western states have been finding since Covid, they largely lack the education, training, organisation and capacity to do this” – If you are talking about the ‘they’ as skilled workforces – then it’s the neoliberal -not enough qualified workers – routine. It’s a cynical neoliberal -financial capital BS song – every worker and person I know could be qualified with just the smallest of competent administration and management – it is not the workers lack of skill but the employer’s of workers lack of skill that is the problem – the owners of financial capital are to shortsighted and busy at the trough with excess feed provided by legislation and the captured congress to see what ails us.
“It’s a cynical neoliberal – financial capital BS song.” Indeed. A pile of erudite language in service of our blood-soaked and corrupt status quo for the sole purpose of justifying the aggressively belligerent realpolitik, defined as humanitarian intervention, which has destroyed the very meaning of humanity.
BS writ large.
Tom Woods refers to Frederic Bastiat.
https://tomwoods.com/ep-469-frederic-bastiat-slayer-of-fallacies/
Generally, building fortresses, which were the F-35’s of 19th century France, has justification only when the shots are fired. See the useless of Maginot line, and German tactics used in Belgium in 1940!
If F-35 were “needed”, they would actually test it! The best I can say about new US weaponry: ‘better than what they replace”……
US’ trillions of dollars military budget is sold by scary fictions about wars and weapons that might be used in those wars.
Like the Russian defensive lines a few Ukrainians saw, the Maginot served its purpose. The Germans either had to go through an easily manned defensive hell or go through a relatively narrow path. The problem was the French decision makers were obsessed with the line. Guys like DeGalle wanted to hold forces in reserve, knowing full well the Germans wouldn’t deal with an undermanned line. Kind of like the Russian active defense, DeGalle and others recognized the undermanned line would force the Germans to certain avenues where French forces could easily be prepped to stop them.
The F35 is a monument to pork spending, the Marines pr department, and confusing rationales for the f35. It’s a USMC fantasy weapon, but it’s not practical for either the Army, Navy or Air Force which don’t need a Swiss army knife. The maginot line freed up man power and could be manned by doofuses. The crack troops were manning the line or in colonial holdings.
Agree that the Maginot line did work as intended, forcing an invader to go by way of Belgium. A planning mistake was the assumption that as in the past, the Ardennes presented a barrier that had to be flanked.
As far as 5th generation fighters, I think it is hard to know what the outcome would be in a peer v peer battle. Some aspects of F-35, such as the logistics support concept, are outside the capability of fighters per se.
The difference today is that there is no longer much in the way of civilian industry in the U.S. It has virtually all been off-shored. Military Keynesianism is a stimulus package for China, Mexico, India, and Vietnam.
Here’s a view of the military budget and its economic impact from another perspective. According to the Bureau of Labor Statistics, “In August 2022, 4.9 million veterans, or 27 percent of all veterans, had a service-connected disability.”
Furthermore, according to the Watson Institute Costs of War at Brown University, “Since 2001, between 1.9 and 3 million service members have served in post-9/11 war operations in Afghanistan and Iraq. Many have been wounded or injured, and suffer from conditions ranging from brain injuries to hearing loss. From FY2001 to FY2020, federal spending on veteran care doubled from 2.4% of the U.S. budget to 4.9%. The costs of caring for post-9/11 war vets will reach between $2.2 and $2.5 trillion by 2050 — most of which has not yet been paid.”
A couple of things;
The author says;
What will it take to get Washington to invest in addressing non-military needs at the levels routinely lavished on the Pentagon? For that, we would need presidential leadership and a new, more forward-looking Congress. That’s a tough, long-term goal to reach, but well worth pursuing.
Bold mine. Good luck with that. Too much money going to crooked congress clowns. Never gonna happen.
2) The money spend on arms/weapons/war is not spent efficiently. The waste is off the charts. I saw it first hand when I worked for a company that had a contract for making military hardware. Example; a replacement o-ring that I could buy at a local hardware store for a dime was billed to Uncle Sam for over 10 bucks. Home of the $300 dollar hammer joke fits.
More bombs, screw your Affordable Connectivity Program that ends in April. They don’t care about the poor or seniors, it couldn’t be more obvious. They can eat cake.
I was around in the “$300 hammer” days. Mostly it was an issue of how overhead was applied. The “fix” was to not allow overhead on these items; instead it got applied elsewhere. I also was required to have a logistician (IIRC GS-11 or 12) approve contractor invoices for parts prior to sending them to be paid.
You could do an analysis of applied overhead on .mil vs civvie contracts.
In my day the services managed a lot of their spares logistics. For “efficiency” there was a push to consolidate that to DLA. I’m not sure DLA is as responsive. In one of my jobs we had a funded position at Ships Parts Control Center (SPCC) outside of Philly to manage our stuff (mostly repair of repairables). That’s gone. (We used economy act orders to repair circuit cards at Sacramento Army Depot but SAD got BRACed as part of the peace dividend.)
Likewise contractor oversight. In Navy we had SUPSHIPS/NAVPRO resident offices, but that consolidated into DCMA except for some SUPHIPS functions (we are now down to just 4 for the whole US).
Consider that the entire modern US Navy has fewer ships than one WW2 Task Force, of which there were many (at least 3 in the PTO alone). That’s one reason why it’s down to 4- that’s are exponentially fewer ships.
Here the author makes the erroneous claim about the causes of the US proxy war against Russia in Ukraine, but the point about opportunity costs is correct.
“Yes, it’s important to provide Ukraine with the necessary equipment and munitions to defend itself from Russia’s grim invasion, but the case should be made on the merits, not through exaggerated accounts about the economic impact of doing so. Otherwise, the military-industrial complex will have yet another never-ending claim on our scarce national resources.”
It’s almost guaranteed that to be taken seriously, writers have to repeat the same tired trope that the evil Russians invaded the plucky, democratic Ukraine just because they hate freedom or some other nonsense
The real story, that the proxy war has illuminated, is that the entire premise of the US MIC–that our high-tech, wonder weapons are superior to the stodgy “Soviet” ones–has been proven erroneous, and that building weapons for profit rather than defense only works against non-peer adversaries.
Yes. The difference between US and Russian armaments is summed up in the comparison of the AK47 and the M16 rifle. The AK47’s parts were stamped out and deliberately fitted only loosely while the M16 featured expensive high precision machined fits. The result was that the M16 would jam because of a few grains of sand, while you could drag an AK47 through sand, mud, etc. and it would still fire. These differing approaches have gone on to the present day, as has been proved in the Ukraine, where US arms such as the (proposed) F-16, HIMARS and artillery are ultra-sensitive, needing constant and intensive maintenance and ideal conditions to operate well, and are easily damaged. Not so (to anything like the same degree) for the equivalent Russian arms.
If you think, like I do, that the economy is just a vast waste based churn and burn operation, then the wildly wasteful endless-war based military industrial complex is very good for the economy. And World War 2 is basically what made America a rich country, and the privatized socialist welfare MIC program that has stolen trillions of our tax dollars ever since has been great for the economy – just not for people. Brokenness and dysfunction are what makes the economy cook. The economy is nowadays, in this era of incredible surplus wealth, a giant inequality production program, where the rich and powerful just harvest money from the many through making everything not work and making sure we are all mindless consumers of unnecessary stuff. Poverty, crime, broken health care system, natural disasters, pointless wars and meaningless lives – they’re all profit making, and trying and not really fixing them is even more profit making. Basically “the economy” is now almost entirely removed from actual human needs and human flourishing. We could flourish with probably 1/4 of the economic activity we daily engage in. Basically capitalism is way far into the self and planet consuming mode. Ever more concentrated wealth and power is taking us straight over the cliff. And yet I’m weirdly optimistic.
As Mr. Hartung points out: The US has the lowest average life expectancy among developed nations. Even Cuba, after decades of siege warfare blockade from el imperio norteamericano, has a higher average life expectancy, how ironic.
“Weapons not food, not homes, not shoes
Not need, just feed the war cannibal animal
I walk the corner to the rubble that used to be a library
Line up to the mind cemetery now…”(RATM)
Paul Krugman says there is no such thing as the Military Industrial Complex (or MICIMATT as Ray McGovern calls it) and that the US should spend MORE on war, weapons, etc.
https://responsiblestatecraft.org/paul-krugman-pentagon/
He says that Eisenhower’s speech is outmoded, outdated and no longer valid. Mr. Hartung and many of us beg to differ;
https://www.youtube.com/watch?v=OyBNmecVtdU
If only it were possible for government to spend money on projects that don’t generate a negative ROI. But governments can’t spend money on housing, infrastructure, healthcare or education, no no.
Either the money goes to weapons for self-confessed Nazis or it disappears.
The focus on money as a measure of military resources is comical, or should be.
How many tanks, ships, planes, missiles, bullets, uniforms, etc. are made out of money? Personally I’d love to see a video in WW2 newsreel style of workers laminating dollar bills together to make a submarine hull or a Bradley IFV; carefully crafting invoices into fan blades for an F-35 engine; molding coins into 5.56mm rounds, etc. It would be hilarious! Well, maybe that’s just me.
Wars are fought with people and things. People and things require resources, one of which is money.
Military spending by itself is a better indicator of the amount of corruption in a country than military capability, with the USA being example #1.
History doesn’t repeat, but there’s a strong rhyme with Japan 1930-1945: some top of the line tech in limited numbers, a military that routs untrained militias, obsolete operational plans, lack of critical resources, a limited industrial capacity, and an unwillingness to adapt to changing situations.
I find the clueless (or avaricious malevolence) and corruption of the US ruling class unfathomable. God help us all because they sure won’t.
Military spending to build a catalog of superior weapons had been an important tool in the Empire’s tool-chest for projecting u.s. power and control over its Empire. The Empire could discourage ‘bad behavior’ by withholding the sale of a weapon or weapons upgrade to one group of squabbling neighbors while selling to another group within the squabble — helping select the winners of the squabble. Unfortunately the u.s. government allowed/encouraged the consolidation of the weapons makers into a small number of large Corporate entities that extract ever larger rents from weapons development and procurement. The financialization of u.s. Industry which Michael Hudson has so thoroughly described included financialization of the weapons makers where designing and fabricating new ways to extract higher rents has all but extinguished the design and fabrication of useful products, where the word ‘useful’ is used most generously when applied to weapons. The high cost and dismal performance of u.s. weapons in the endless foreign wars has been highlighted in Ukraine and Israel. This nicely complements the many remarkable and self-defeating actions of u.s. diplomacy that work to further undermine the Empire. The u.s. has enemies at the gates on both sides of the gates.
The “Tradeoffs” section concludes this post a gradual descent into wishful thinking and speculation about a ‘moral’ budget. The shambles of the u.s. economy requires much more than wishful thinking and making tradeoffs to shift the bloated u.s. military spending toward realizing some sort of ‘moral’ budget. Even if the money were shifted toward other spending priorities — without some major changes in the structure of u.s. economy and Society — the best we might hope for is less destructive spending feeding u.s. government revenues into the pockets of a different faction of Corporate Welfare Queens.
Game of Thrones gives a hint of all this. The Iron Throne got lots of publicity, and many people know what it looked like in the TV series, but buried in the series is the story of the Iron Bank. Maker and destroyer of kings, the Iron Bank of Braavos is the real story! I wonder if the odd final season was a hint that it little mattered who was king (or queen). Sort of like in our world.