Military Keynesianism

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Template:Short description 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. But where Keynes advocated increasing public spending on socially useful items (infrastructure in particular), additional public spending is allocated to the arms industry, the area of defense being that over which the executive exercises greater discretionary power. This type of economy is linked to the interdependence between welfare and warfare 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.<ref name=Custers>Template:Cite journal</ref><ref>Template:Cite journal</ref><ref name="krugman09">Template:Cite news</ref>

Keynesian economics and application

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.<ref>Template:Cite web</ref>

Noam Chomsky, 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.<ref>Template:Cite journal</ref>

United States

In the United States this theory was applied during the Second World War, during the presidencies of Franklin Delano Roosevelt and Harry Truman, the latter with the document NSC-68. The influence of Military Keynesianism on US economic policy choices lasted until the Vietnam War. 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 advocated that government spending could be used "in the interests of peace and prosperity" instead of "war and destruction".<ref name="keynes_letter">Template:Cite web</ref> An example of such policies are the Public Works Administration in the 1930s in the United States.

Cold War–era mass production of aircraft benefited the U.S. civilian aircraft industry leading to the dominance of U.S. aviation companies. There is also strong evidence that the government intentionally paid a higher price for these innovations to serve as a subsidy for civilian aircraft advancement.<ref name=":0">Template:Cite journal</ref>

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.<ref name="keynes_letter"/>

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Barney Frank

While the idea dates back to Keynes, a similar term is often attributed to Barney Frank, and seems to have been first used around funding the F-22 fighter:<ref name="krugman09" /><ref>Template:Cite web</ref>

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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.Template:Citation needed
  • 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.Template:Citation needed
  • 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.<ref name=Custers/>

Permanent war economy

The concept of permanent war economy originated in 1945 with an article by Trotskyist<ref>Template:Cite journal</ref> 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; 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.<ref>See Peter Drucker, Max Schachtman and his Left. A Socialist Odyssey through the 'American Century', Humanities Press 1994, p. xv, 218; Paul Hampton, "Trotskyism after Trotsky? C'est moi!", in Workers Liberty, vol 55, April 1999, p. 38</ref>

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 effect size, which are aggregated results from multiple studies, found that military expenditures tend to have positive effects on economic growth in developed countries but generally negative effects on growth in less developed countries. The study attributes the negative effects to the diversion of resources from productive sectors such as education and infrastructure.<ref>Template:Citation</ref>

See also

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Notes

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References


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