Guns versus butter model
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macroeconomics Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole. For example, using interest rates, taxes, and ...
, the guns versus butter model is an example of a simple
production–possibility frontier A production–possibility frontier (PPF), production possibility curve (PPC), or production possibility boundary (PPB), or transformation curve/boundary/frontier is a curve which shows various combinations of the amounts of two goods which can be ...
. It demonstrates the relationship between a nation's investment in
defense Defense or defence may refer to: Tactical, martial, and political acts or groups * Defense (military), forces primarily intended for warfare * Civil defense, the organizing of civilians to deal with emergencies or enemy attacks * Defense industr ...
and ''civilian goods''. The "guns or butter" model is used generally as a simplification of national spending as a part of
GDP Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is often ...
. This may be seen as an analogy for choices between defense and civilian spending in more complex economies. The nation will have to decide which balance of guns versus butter best fulfills its needs, with its choice being partly influenced by the military spending and military stance of potential opponents. Researchers in
political economy Political economy is the study of how Macroeconomics, economic systems (e.g. Marketplace, markets and Economy, national economies) and Politics, political systems (e.g. law, Institution, institutions, government) are linked. Widely studied ph ...
have viewed the trade-off between military and
consumer spending Consumer spending is the total money spent on final goods and services by individuals and households. There are two components of consumer spending: induced consumption (which is affected by the level of income) and autonomous consumption (which ...
as a useful predictor of election success. In this example, a nation has to choose between two options when spending its finite resources. It may buy either guns (invest in defense/military) or butter (invest in production of goods), or a combination of both.


Origin of the term

One theory on the origin of the concept comes from the decision to expand munitions before the US entered World War I. In 1914 the leading global exporter of
nitrate Nitrate is a polyatomic ion A polyatomic ion, also known as a molecular ion, is a covalent bonded set of two or more atoms, or of a metal complex, that can be considered to behave as a single unit and that has a net charge that is not zer ...
s for
gunpowder Gunpowder, also commonly known as black powder to distinguish it from modern smokeless powder, is the earliest known chemical explosive. It consists of a mixture of sulfur, carbon (in the form of charcoal) and potassium nitrate (saltpeter). ...
was
Chile Chile, officially the Republic of Chile, is a country in the western part of South America. It is the southernmost country in the world, and the closest to Antarctica, occupying a long and narrow strip of land between the Andes to the east a ...
. Chile maintained neutrality during the war and provided nearly all of the US's nitrate requirements. It was also the principal ingredient of chemical fertilizer in farming. The US realized it needed control of its own supply. The
National Defense Act of 1916 The National Defense Act of 1916, , was a United States federal law that updated the Militia Act of 1903, which related to the organization of the military, particularly the National Guard. The principal change of the act was to supersede provi ...
directed the president to select a site for the artificial production of nitrates within the United States. It was not until September 1917, several months after the United States entered the war, that Wilson selected
Muscle Shoals, Alabama Muscle Shoals is the largest city in Colbert County, Alabama, Colbert County, Alabama, United States. It is located along the Tennessee River in the northern part of the state and, as of the 2010 United States Census, 2010 census, the populati ...
, after more than a year of competition among political rivals. A deadlock in the Congress was broken when South Carolina Senator Ellison D. Smith sponsored the National Defense Act of 1916 that directed "the Secretary of Agriculture to manufacture nitrates for fertilizers in peace and munitions in war at water power sites designated by the President." This was presented by the news media as "guns and butter." Tax expert Albert Lepawsky stated in 1941, "Contrary to the popular slogan, it is not a question of guns versus butter" because basic food supplies will not be cut. He explained:
Reducing non-defense consumption as a whole, however, may play fully as important a role as increasing the nation's production. Indeed, for the first World War, it was estimated by John M. Clark that while 13 billions came out of increased production, 19 billions were paid for by decreased consumption.


Significance

"Butter" represents nonsecurity goods that increase social welfare, such as schools, hospitals, parks, and roads. "Guns" refer to security goods such as personnel—both troops and civilian support staff—as well as military equipment like weapons, ships, or tanks. Because these two types of goods represent a tradeoff, a country cannot increase one without negatively impacting the other. States often attempt to share the burden of defense through alliances. This allows a state to reduce its own production of guns and shift resources towards social goods. If armed conflict is avoided, then expenditure on guns represents deadweight, or resources that could have been better spent on butter. In the case of war, however, the
production–possibility frontier A production–possibility frontier (PPF), production possibility curve (PPC), or production possibility boundary (PPB), or transformation curve/boundary/frontier is a curve which shows various combinations of the amounts of two goods which can be ...
shrinks through the loss of life and infrastructure. This, in turn, limits the ability of the state to produce social goods, and the ability of society to benefit from them.


Quoted use of the term

Perhaps the best known use of the phrase (in translation) was in
Nazi Germany Nazi Germany (lit. "National Socialist State"), ' (lit. "Nazi State") for short; also ' (lit. "National Socialist Germany") (officially known as the German Reich from 1933 until 1943, and the Greater German Reich from 1943 to 1945) was ...
. In a speech on January 17, 1936, Minister of Propaganda
Joseph Goebbels Paul Joseph Goebbels (; 29 October 1897 – 1 May 1945) was a German Nazi politician who was the ''Gauleiter'' (district leader) of Berlin, chief propagandist for the Nazi Party, and then Reich Minister of Propaganda from 1933 to 19 ...
stated: "We can do without butter, but, despite all our love of peace, not without arms. One cannot shoot with butter, but with guns." Referencing the same concept, sometime in the summer of the same year another Nazi official,
Hermann Göring Hermann Wilhelm Göring (or Goering; ; 12 January 1893 – 15 October 1946) was a German politician, military leader and convicted war criminal. He was one of the most powerful figures in the Nazi Party, which ruled Germany from 1933 to 1 ...
, announced in a speech: "Guns will make us powerful; butter will only make us fat." US President
Lyndon B. Johnson Lyndon Baines Johnson (; August 27, 1908January 22, 1973), often referred to by his initials LBJ, was an American politician who served as the 36th president of the United States from 1963 to 1969. He had previously served as the 37th vice ...
used the phrase to catch the attention of the national media while reporting on the state of national defense and the economy. Another use of the phrase was British Prime Minister
Margaret Thatcher Margaret Hilda Thatcher, Baroness Thatcher (; 13 October 19258 April 2013) was Prime Minister of the United Kingdom from 1979 to 1990 and Leader of the Conservative Party (UK), Leader of the Conservative Party from 1975 to 1990. S ...
's statement, in a 1976 speech she gave at the old
Kensington Town Hall Kensington is a district in the Royal Borough of Kensington and Chelsea in the West of Central London. The district's commercial heart is Kensington High Street, running on an east–west axis. The north-east is taken up by Kensington Gardens ...
, in which she said, "The Soviets put guns over butter, but we put almost everything over guns."Speech at Kensington Town Hall ("Britain Awake
"), Margaret Thatcher Foundation">Britain Awake">Speech at Kensington Town Hall ("Britain Awake
"), Margaret Thatcher Foundation/ref>


Great Society example

Lyndon B. Johnson Lyndon Baines Johnson (; August 27, 1908January 22, 1973), often referred to by his initials LBJ, was an American politician who served as the 36th president of the United States from 1963 to 1969. He had previously served as the 37th vice ...
's Great Society programs in the 1960s, when he was President of the United States, are examples of the guns versus butter model. While Johnson wanted to continue New Deal programs and expand welfare with his own Great Society programs, he was also involved in both the
arms race An arms race occurs when two or more groups compete in military superiority. It consists of a competition between two or more states to have superior armed forces; a competition concerning production of weapons, the growth of a military, and t ...
of the
Cold War The Cold War is a term commonly used to refer to a period of geopolitical tension between the United States and the Soviet Union and their respective allies, the Western Bloc and the Eastern Bloc. The term '' cold war'' is used because the ...
and in the
Vietnam War The Vietnam War (also known by #Names, other names) was a conflict in Vietnam, Laos, and Cambodia from 1 November 1955 to the fall of Saigon on 30 April 1975. It was the second of the Indochina Wars and was officially fought between North Vie ...
. These wars put strains on the economy and hampered his Great Society programs. This is in stark contrast to President
Dwight D Eisenhower Dwight David "Ike" Eisenhower (born David Dwight Eisenhower; ; October 14, 1890 – March 28, 1969) was an American military officer and statesman who served as the 34th president of the United States from 1953 to 1961. During World War II, ...
's own objections to the expansion and endless warfare of the military-industrial complex. In his "Chance For Peace" speech in 1953, he referred to this very
trade-off A trade-off (or tradeoff) is a situational decision that involves diminishing or losing one quality, quantity, or property of a set or design in return for gains in other aspects. In simple terms, a tradeoff is where one thing increases, and anot ...
, giving specific examples:
Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some fifty miles of concrete pavement. We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people. This is, I repeat, the best way of life to be found on the road the world has been taking. This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron. ... Is there no other way the world may live?


See also

*
Opportunity cost In microeconomic theory, the opportunity cost of a particular activity is the value or benefit given up by engaging in that activity, relative to engaging in an alternative activity. More effective it means if you chose one activity (for example ...
*
Peace dividend ''Peace dividend'' was a political slogan popularized by US President George H. W. Bush and UK Prime Minister Margaret Thatcher in the light of the 1988–1991 dissolution of the Soviet Union, that described the economic benefit of a decrease in de ...
, the amount of civilian goods produced by a decrease in defense spending. *
Revealed preferences Revealed preference theory, pioneered by economist Paul Anthony Samuelson in 1938, is a method of analyzing choices made by individuals, mostly used for comparing the influence of policies on consumer behavior. Revealed preference models assume t ...
*
Scarcity In economics, scarcity "refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources which the best technical knowledge is capable of using to produce only limited maximum amounts of each economic good. ...


References

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Further reading

* Carlton-Ford, Steve. 2009
Major Armed Conflicts, Militarization, and Life Chances: Pooled Time-Series Analysis.
Armed Forces & Society ''Armed Forces & Society'' is a quarterly peer-reviewed academic publication that publishes articles and book reviews on a wide variety of topics including civil–military relations, military sociology, veterans, military psychology, military ins ...
, Vol. 36, No. 5. * Heo, Uk and Sung Deuk Hahm. 2006
Politics, Economics, and Defense Spending in South Korea.
Armed Forces & Society ''Armed Forces & Society'' is a quarterly peer-reviewed academic publication that publishes articles and book reviews on a wide variety of topics including civil–military relations, military sociology, veterans, military psychology, military ins ...
, Vol. 32, No. 4. * Ward, Michael D., David R. Davis and Steve Chan. 1993
Military Spending and Economic Growth in Taiwan
Armed Forces & Society ''Armed Forces & Society'' is a quarterly peer-reviewed academic publication that publishes articles and book reviews on a wide variety of topics including civil–military relations, military sociology, veterans, military psychology, military ins ...
, Vol. 19, No. 4. Economics models Public economics Military economics William Jennings Bryan