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. 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 indus ...

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 ofte ...

. 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 economic systems (e.g. markets and national economies) and political systems (e.g. law, institutions, government) are linked. Widely studied phenomena within the discipline are systems such as labour ...

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 with the chemical formula . Salts containing this ion are called nitrates. Nitrates are common components of fertilizers and explosives. Almost all inorganic nitrates are soluble in water. An example of an insolu ...

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). T ...

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 eas ...

. 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, United States. It is located along the Tennessee River in the northern part of the state and, as of the 2010 census, the population of Muscle Shoals was 13,146. The estimated popu ...

, 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 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 ...

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 from 1975 to 1990. She was the first female British prime ...

's statement, in a 1976 speech she gave at the old Kensington Town Hall, 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.html" ;"title="Britain Awake">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

'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 ...

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 t ...

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'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?

References

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Origin of the term

Significance

Quoted use of the term

Great Society example

See also

References

Further reading