Military Keynesianism is an
economic policy
The economy of governments covers the systems for setting levels of taxation, government budgets, the money supply and interest rates as well as the labour market, national ownership, and many other areas of government interventions into the e ...
based on the position that government should raise
military spending
A military budget (or military expenditure), also known as a defense budget, is the amount of financial resources dedicated by a state to raising and maintaining an armed forces or other methods essential for defense purposes.
Financing milit ...
to boost
economic growth
Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of ...
. It is a
fiscal stimulus
In economics, stimulus refers to attempts to use monetary policy or fiscal policy (or stabilization policy in general) to stimulate the economy. Stimulus can also refer to monetary policies such as lowering interest rates and quantitative easi ...
policy as advocated by
John Maynard Keynes
John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in ...
. But where Keynes advocated increasing
public spending
Government spending or expenditure includes all government consumption, investment, and transfer payments. In national income accounting, the acquisition by governments of goods and services for current use, to directly satisfy the individual o ...
on socially useful items (infrastructure in particular), additional public spending is allocated to the
arms industry
The arms industry, also known as the arms trade, is a global industry which manufactures and sells weapons and military technology. It consists of a commercial industry involved in the research and development, engineering, production, and servi ...
, the area of defense being that over which the executive exercises greater discretionary power. Typical examples of such policies are
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 ...
, or the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
during and after
World War II
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
, during the presidencies of
Franklin D. Roosevelt
Franklin Delano Roosevelt (; ; January 30, 1882April 12, 1945), often referred to by his initials FDR, was an American politician and attorney who served as the 32nd president of the United States from 1933 until his death in 1945. As the ...
and
Harry S. Truman
Harry S. Truman (May 8, 1884December 26, 1972) was the 33rd president of the United States, serving from 1945 to 1953. A leader of the Democratic Party, he previously served as the 34th vice president from January to April 1945 under Franklin ...
. This type of economy is linked to the interdependence between
welfare
Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specificall ...
and
warfare
War is an intense armed conflict between states, governments, societies, or paramilitary groups such as mercenaries, insurgents, and militias. It is generally characterized by extreme violence, destruction, and mortality, using regular ...
states, in which the latter feeds the former, in a potentially unlimited spiral. The term is often used pejoratively to refer to politicians who apparently reject
Keynesian economics
Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output an ...
, but use Keynesian arguments in support of excessive military spending.
Keynesian Economics and Application
Nazi Germany
Much of the
Third Reich
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 ...
economy was oriented towards militarization, especially to prepare for a possible
war
War is an intense armed conflict between states, governments, societies, or paramilitary groups such as mercenaries, insurgents, and militias. It is generally characterized by extreme violence, destruction, and mortality, using regular o ...
with the Slavic nations, rather than in the production of
consumer goods
A final good or consumer good is a final product ready for sale that is used by the consumer to satisfy current wants or needs, unlike a intermediate good, which is used to produce other goods. A microwave oven or a bicycle is a final good, but ...
or towards commercial expansion. Nevertheless, the concentration of
capital
Capital may refer to:
Common uses
* Capital city, a municipality of primary status
** List of national capital cities
* Capital letter, an upper-case letter Economics and social sciences
* Capital (economics), the durable produced goods used f ...
in the arms
industry
Industry may refer to:
Economics
* Industry (economics), a generally categorized branch of economic activity
* Industry (manufacturing), a specific branch of economic activity, typically in factories with machinery
* The wider industrial sector ...
had favored a rapid expansion of German industrial capacity and helped to reduce
unemployment
Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for Work (human activity), w ...
rates.
United States
In the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
this theory was applied during the
Second World War
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
, during the presidencies of
Franklin Delano Roosevelt
Franklin Delano Roosevelt (; ; January 30, 1882April 12, 1945), often referred to by his initials FDR, was an American politician and attorney who served as the 32nd president of the United States from 1933 until his death in 1945. As the ...
and
Harry Truman
Harry S. Truman (May 8, 1884December 26, 1972) was the 33rd president of the United States, serving from 1945 to 1953. A leader of the Democratic Party, he previously served as the 34th vice president from January to April 1945 under Franklin ...
, the latter with the document
NSC-68. The influence of Military Keynesianism on US economic policy choices lasted until 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 ...
. Keynesians maintain that government spending should first be used for useful purposes such as infrastructure investment, but that even non-useful spending may be helpful during recessions.
John Maynard Keynes
John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in ...
advocated that government spending could be used "in the interests of peace and prosperity" instead of "war and destruction".
An example of such policies are the
Public Works Administration
The Public Works Administration (PWA), part of the New Deal of 1933, was a large-scale public works construction agency in the United States headed by Secretary of the Interior Harold L. Ickes. It was created by the National Industrial Recove ...
in the 1930s in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
.
Keynes' 1933 letter to Roosevelt
In 1933, John Maynard Keynes wrote an open letter to President Franklin Roosevelt urging the new president to borrow money to be spent on public works programs.
Barney Frank
While the idea dates back to Keynes, a similar term is often attributed to
Barney Frank
Barnett Frank (born March 31, 1940) is a former American politician. He served as a member of the U.S. House of Representatives from Massachusetts from 1981 to 2013. A Democrat, Frank served as chairman of the House Financial Services Committee ...
, and seems to have been first used around funding the
F-22
The Lockheed Martin F-22 Raptor is an American single-seat, twin-engine, all-weather stealth tactical fighter aircraft developed for the United States Air Force (USAF). As the result of the USAF's Advanced Tactical Fighter (ATF) program, th ...
fighter:
Criticisms
The most direct economic criticism of military Keynesianism maintains that government expenditures on non-military public goods such as health care, education, mass transit, and infrastructure repair create more jobs than equivalent military expenditures.
Noam Chomsky
Avram Noam Chomsky (born December 7, 1928) is an American public intellectual: a linguist, philosopher, cognitive scientist, historian, social critic, and political activist. Sometimes called "the father of modern linguistics", Chomsky is ...
, a critic of military Keynesianism, contends that ''military'' Keynesianism offers the state advantages over ''non-military'' Keynesianism. Specifically, military Keynesianism can be implemented with less public interest and participation. "Social spending may well arouse public interest and participation, thus enhancing the threat of democracy; the public cares about hospitals, roads, neighborhoods, and so on, but has no opinion about the choice of missiles and high-tech fighter planes." Essentially, when the public is less interested in the details of state spending, it affords the state increased discretion in how it spends money.
Forms
The following forms of military Keynesianism may be differentiated:
* First, there is the differentiation between the use of military spending as 'pump primer', and efforts to achieve long term multiplier effects by the given spending. A government may opt to approve the purchases of fighter planes, warships or other military commodities so as to weather a recession. Alternatively, it may opt to approve the purchase of fighter planes, warships or other military commodities throughout all the years of a given business cycle. Since the construction of large armament systems requires extensive planning and research, capitalist states generally prefer to rely on arms' purchases or other military allocations for longer-term macro-economic policymaking and regulation.
* A second differentiation that needs to be made is between primary and secondary forms of military Keynesianism. In both cases, the state uses the multiplier mechanism in order to stimulate aggregate demand in society. But the primary form of military Keynesianism refers to a situation where the state uses its military allocations as the principal means to drive the business cycle. In case of a secondary form of military Keynesianism, the given allocations contribute towards generating additional demand, but not to the extent that the economy is fully, or primarily, driven by the military allocations.
* The third differentiation starts from the observation that modern capitalist economies do not function as closed systems but rely on foreign trade and exports as outlets for the sale of a part of their surplus. This general observation applies to the surplus generated in the military sector as well. As the vast amount of data regarding state promotion of arms' exports do confirm, capitalist states actively try to ensure that their armament corporations gain access to import orders from foreign states, and they do so amongst others in order to generate multiplier effects. Hence, there is a need to also differentiate between the two forms of domestic and 'externalized' military Keynesianism.
[
]
Permanent War Economy
The concept of permanent war economy originated in 1944 with an article by Ed Sard
Ed, ed or ED may refer to:
Arts and entertainment
* ''Ed'' (film), a 1996 film starring Matt LeBlanc
* Ed (''Fullmetal Alchemist'') or Edward Elric, a character in ''Fullmetal Alchemist'' media
* ''Ed'' (TV series), a TV series that ran fro ...
(alias Frank Demby, Walter S. Oakes and T.N. Vance), a theoretician who predicted a post-war 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 ...
. He argued at the time that the United States would retain the character of a war economy
A war economy or wartime economy is the set of contingencies undertaken by a modern state to mobilize its economy for war production. Philippe Le Billon describes a war economy as a "system of producing, mobilizing and allocating resources t ...
; even in peacetime, US military expenditure
The military budget is the largest portion of the discretionary United States federal budget allocated to the United States Department of Defense, Department of Defense, or more broadly, the portion of the budget that goes to any military-rela ...
would remain large, reducing the percentage of unemployed compared to the 1930s. He extended this analysis in 1950 and 1951.
Empirical estimates
Many economists have attempted to estimate the multiplier effect of military expenditures with mixed results. A meta-analysis of 42 primary studies with 243 estimates concluded that military expenditures tended to increase the economy in developed countries with military exports but decrease the economy in less developed countries with generally higher level of political corruption.
Externalities
Externalities
In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced goods involved in either co ...
are rarely if ever considered in estimating a multiplier effect. This can be a serious issue for military expenditures. For example, the Islamic State of Iraq and the Levant
An Islamic state is a State (polity), state that has a form of government based on sharia, Islamic law (sharia). As a term, it has been used to describe various historical Polity, polities and theories of governance in the Islamic world. As a t ...
(ISIL) relies mostly on captured weapons. For example, in Mosul
Mosul ( ar, الموصل, al-Mawṣil, ku, مووسڵ, translit=Mûsil, Turkish: ''Musul'', syr, ܡܘܨܠ, Māwṣil) is a major city in northern Iraq, serving as the capital of Nineveh Governorate. The city is considered the second large ...
between 4 and 10 June 2014 a group of between 500 and 600 ISIL troops "were able to seize six divisions' worth of strategic weaponry, all of it US-supplied" from a force with a paper strength of 120,000 men. In considering the multiplier effect of military expenditures, the people killed and property destroyed are not considered. The only things that are considered are the increased weapon sales to replace those stolen and the costs associated with combatting ISIL. Those are considered as increasing the Gross Domestic Product
Gross domestic product (GDP) is a money, monetary Measurement in economics, 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 subjec ...
of the United States, and that is assumed to be good.
See also
*Arms industry
The arms industry, also known as the arms trade, is a global industry which manufactures and sells weapons and military technology. It consists of a commercial industry involved in the research and development, engineering, production, and servi ...
*Bernard Baruch
Bernard Mannes Baruch (August 19, 1870 – June 20, 1965) was an American financier and statesman.
After amassing a fortune on the New York Stock Exchange, he impressed President Woodrow Wilson by managing the nation's economic mobilization in ...
*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 ...
*Countercyclical
Procyclical and countercyclical variables are variables that fluctuate in a way that is positively or negatively correlated with business cycle fluctuations in gross domestic product (GDP). The scope of the concept may differ between the context ...
*Employer of last resort
Employers of last resort (ELR) are employers in an Economic system, economy to whom workers go for jobs when no other jobs are available; the term is by analogy with "lender of last resort". The phrase is used in two senses:
* undesirable jobs, oft ...
*Iron triangle (US politics)
In United States politics, the "iron triangle" comprises the policy-making relationship among the congressional committees, the bureaucracy, and interest groups, as described in 1981 by Gordon Adams. Earlier mentions of this ‘iron triangle’ ...
*Keynesian economics
Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output an ...
*Lemon socialism
Lemon socialism is a pejorative term for a form of government intervention in which government subsidies go to weak or failing firms (''lemons''; see Lemon law), with the effective result that the government (and thus the taxpayer) absorbs part ...
*List of countries by military expenditures
This is a list of countries by military expenditure in a given year. Military expenditure figures are presented in United States dollars based on either constant or current exchange rates.
Military expenditure, total
; Stockholm International P ...
*Military budget of the United States
The military budget is the largest portion of the discretionary United States federal budget allocated to the Department of Defense, or more broadly, the portion of the budget that goes to any military-related expenditures. The military budget ...
*Military–industrial complex
The expression military–industrial complex (MIC) describes the relationship between a country's military and the defense industry that supplies it, seen together as a vested interest which influences public policy. A driving factor behind the r ...
*Parable of the broken window
The parable of the broken window was introduced by French economist Frédéric Bastiat in his 1850 essay " That Which We See and That Which We Do Not See" ("") to illustrate why destruction, and the money spent to recover from destruction, is not ...
*Perpetual war
Perpetual war, endless war, or a forever war, is a lasting state of war with no clear conditions that would lead to its conclusion. These wars are situations of ongoing tension that may escalate at any moment, similar to the Cold War. From the l ...
*Ultra-imperialism
Ultra-imperialism, or occasionally hyperimperialism and formerly super-imperialism, is a potential, comparatively peaceful phase of capitalism, meaning after or beyond imperialism. It was described mainly by Karl Kautsky. Post-imperialism is someti ...
*War economy
A war economy or wartime economy is the set of contingencies undertaken by a modern state to mobilize its economy for war production. Philippe Le Billon describes a war economy as a "system of producing, mobilizing and allocating resources t ...
Notes
References
*Walter S. Oakes, 1944, "Towards a Permanent Arms Economy?", ''Politics'', February.
*T. N. Vance, 1950
"After Korea What? An Economic Interpretation of U.S. Perspectives"
''New International'', November–December.
*T. N. Vance, 1951
''New International''. eries of articles
The Erie people (also Eriechronon, Riquéronon, Erielhonan, Eriez, Nation du Chat) were Indigenous peoples of the Americas, Indigenous people historically living on the south shore of Lake Erie. An Iroquoian Peoples, Iroquoian group, they lived in ...
*Charles Edward Wilson, "Army Ordnance (Vol. XXVI, No. 143, March–April 1944)".
*Tony Cliff
Tony Cliff (born Yigael Glückstein, he, יגאל גליקשטיין; 20 May 1917 – 9 April 2000) was a Trotskyist activist. Born to a Jewish family in Palestine, he moved to Britain in 1947 and by the end of the 1950s had assumed the pen nam ...
''Perspectives for the permanent war economy.''
Socialist Review March 1957. Reprint Tony Cliff, ''Marxist Theory after Trotsky. Selected Writings. Volume 3.'' Bookmarks London 2003.
*Chris Harman
Chris Harman (8 November 1942 – 7 November 2009) was a British journalist and political activist, and a member of the Central Committee of the Socialist Workers Party (UK), Socialist Workers Party. He was an editor of ''International Soc ...
, ''Explaining the Crisis – A Marxist Re-Appraisal.'' Bookmarks London 1999.
* Chris Harman
Imperialism''
International Socialism 99. Summer 2003.
*Michael Kidron
Michael Kidron (20 September 1930 – 25 March 2003) was a British cartographer. He was one of the early founders of the International Socialists (forerunners of the Socialist Workers Party; SWP) through the 1960s and 1970s, and the first edi ...
, ''Western Capitalism Since the War.'' Penguin Books Harmondsworth 1970.
*Alfred Sohn-Rethel
Alfred Sohn-Rethel (4 January 1899 – 6 April 1990) was a French-born German Marxian economist and philosopher especially interested in epistemology. His main intellectual achievement was the publication of ''Intellectual and Manual Labour: A C ...
, ''Industrie und Nationalsozialismus. Aufzeichnungen aus dem “Mitteleuropäischen Wirtschaftstag”.'' Wagenbach-Verlag Berlin 1992.
* Alfred Sohn-Rethel, ''Economy and class structure of German fascism'' London, CSE Books 1978.
*Ernest Mandel
Ernest Ezra Mandel (; also known by various pseudonyms such as Ernest Germain, Pierre Gousset, Henri Vallin, Walter (5 April 1923 – 20 July 1995), was a Belgian Marxian economist, Trotskyist activist and theorist, and Holocaust survivor. He fo ...
, ''Late Capitalism''. London: Verso, 1975.
External links
Cheap Wars
by Jonathan Nitzan
Jonathan Nitzan is Professor of Political Economy at York University, Toronto, Canada.
Work
Nitzan is the co-author (with Shimshon Bichler) of ''Capital as Power: A Study of Order and Creorder'', published 2009. Their writings focus of the nature ...
, Ph.D. Associate Professor of Political Economy, and Shimshon Bichler
Shimshon Bichler is an educator who teaches political economy at colleges and universities in Israel. Along with Jonathan Nitzan, Bichler has created a power theory of capitalism and theory of differential accumulation in their analysis of the poli ...
, Lecturer of Political Economy
Defense Doesn't Need Stimulus
by Christopher Preble, Ph.D. History
Dollars & Sense
''Dollars & Sense'' is a magazine focusing on economics from a progressive perspective, published by Dollars & Sense, Inc, which also publishes textbooks in the same genre.
''Dollars & Sense'' describes itself as publishing "economic news and ana ...
magazine
* ttp://www.independent.org/newsroom/article.asp?id=2399 Military Keynesianism to the Rescue?by Robert Higgs
Robert Higgs (born 1 February 1944) is an American economic historian and economist combining material from Public Choice, the New institutional economics, and the Austrian school of economics; and describes himself as a " libertarian anarchis ...
, Ph.D. Professor Emeritus of Economics
Rich Nation, Strong Army: National Security and the Technological Transformation of Japan
by Richard J. Samuels Richard J. Samuels (born November 2, 1951) is an American academic, political scientist, author, Japanologist, Ford International Professor of Political Science and director of the Center for International Studies at the Massachusetts Institute of ...
, Ph.D. Professor of Political Science
The economic disaster that is military Keynesianism: Why the US has really gone broke
by Dr.Chalmers Johnson
Chalmers Ashby Johnson (August 6, 1931 – November 20, 2010) was an American political scientist specializing in comparative politics, and professor emeritus of the University of California, San Diego. He served in the Korean War, was a consult ...
in the English edition of Le Monde Diplomatique
''Le Monde diplomatique'' (meaning "The Diplomatic World" in French) is a French monthly newspaper offering analysis and opinion on politics, culture, and current affairs.
The publication is owned by Le Monde diplomatique SA, a subsidiary com ...
High Tech, A Subsidiary Of Pentagon Inc. by Robert B. Reich
Macroeconomic Consequences of Peace: American Radical Economists and the Problem of Military Keynesianism, 1938–1975
Keynesian economics
Military–industrial complex
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Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output and ...
Lobbying
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Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output and ...
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