by Washington's Blog
November 16, 2009
I've written two essays attempting to disprove
"military Keynesianism" - the idea that military spending is the best
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 some
half 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
"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
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
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,
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
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.
“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
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 demobilization, 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 complex.
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.
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
fear-monger, 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 theorized
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 United States.
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.