Military Keynesianism is an economic policy based on the position that government should raise military spending to boost economic growth. It is a fiscal stimulus 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 classification, industry which manufacturing, manufactures and sells weapons and military technology. It consists of a commerce, commercial Private industry, industry involved ...

, 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 territori ...

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 opposing ...

, 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. 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 specifical ...

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 regul ...

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, 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, b ...

or towards commercial expansion. Nevertheless, the concentration of capital 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 during the refere ...

rates.

United States

In the

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 opposi ...

, during the presidencies of Franklin Delano Roosevelt 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 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 Vietnam a ...

. 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.

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 in the 1930s in the

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 Committ ...

, and seems to have been first used around funding the F-22 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 i ...

, 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 (alias Frank Demby, Walter S. Oakes and T.N. Vance), a theoretician who predicted a post-war arms race. 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 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 that has a form of government based on Islamic law (sharia). As a term, it has been used to describe various historical polities and theories of governance in the Islamic world. As a translation of the Arabic term ...

(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 larg ...

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 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 oft ...

of the United States, and that is assumed to be good.

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*Charles Edward Wilson, "Army Ordnance (Vol. XXVI, No. 143, March–April 1944)". * Tony Cliff
''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. He was an editor of ''International Socialism'' and ''Socialist Work ...

, ''Explaining the Crisis – A Marxist Re-Appraisal.'' Bookmarks London 1999. * Chris Harman
Imperialism''
International Socialism 99. Summer 2003. * Michael Kidron, ''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 f ...

, ''Late Capitalism''. London: Verso, 1975.

External links

Cheap Wars
by Jonathan Nitzan, Ph.D. Associate Professor of Political Economy, and Shimshon Bichler, 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, Ph.D. Professor Emeritus of Economics
Rich Nation, Strong Army: National Security and the Technological Transformation of Japan
by Richard J. Samuels, Ph.D. Professor of Political Science
The economic disaster that is military Keynesianism: Why the US has really gone broke
by Dr. Chalmers Johnson in the English edition of Le Monde Diplomatique
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 Macroeconomics

Keynesianism 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 ...

Lobbying

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