On Military Keynesianism

Max Sawicky sawicky at epinet.org
Mon Mar 29 10:02:47 PST 1999

A few factoids-cum-notes, none of which bear on whether NATO should be in Yugoslavia:

1. Since the mid-80's the economic policy of the U.S. cannot be said to conform to any sort of military Keynesianism, since the basic drive has been for deficit reduction. Accordingly, the Keynesian element here is problematic. It also happens that military spending relative to the budget and the economy have been reduced. Defense peaked as a share of GDP in 1986 (6.3). Before that, it hadn't been as high unless you go back to 1972. In 1998, defense/GDP is 3.2%.

2. The Clinton budget does not propose an increase in defense if one discounts for inflation. This also means, naturally, that defense/GDP continues to decline.

3. Conflicts on the scale of the Gulf War cannot alter the basic trend of stagnation in military spending. Defense/GDP continued to decline from 1989 to the present. There was no uptick, not even a temporary one.

4. The real grease in military spending -- the economic rents, if you will -- come from hardware and R&D, not from soldiers' pay and gumboots. In the budget wars, the soldiers always lose; just take a look at their barracks. Military conflicts are not necessarily the best way to get more funds allocated to hardware R&D. In fact, the debate for more hardware/R&D had already been decided before the Kosovo affair. By supporting anti-missile defense, Clinton and the Democrats already gave the contractors all they could have asked for. By encouraging Serbian terrorism, in fact, this intervention threatens to take the focus away from the mythical missile threat to the more likely one, relatively speaking, of two guys in a pickup truck, thereby sapping the drive to finance the fancy hardware.

5. The last thing a hardware vendor wants is a legitimate test of his product. To maximize sales, both buyer and seller have an interest in hoked-up tests that make them look good, not real tests which could end unhappily. Think of the possible fall-out from the shoot-down of the "Stealth" fighter.

6. Military Keynesianism may have meant something back in the 1950's, or in 1962 when defense/GDP was near ten percent. Presently the defense budget is about $270 billion. An unlikely increase of, say, $80 billion, all in one year, and all deficit-financed, might add a percent or so of GDP in a time of economic slack. It's hard to imagine the fate of capitalism hinging on this.


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