Guns versus butter model
In macroeconomics, 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 and civilian goods. In this example, a nation has to choose between two options when spending its finite resources. It can buy either guns (invest in defense/military) or butter (invest in production of goods), or a combination of both. This can be seen as an analogy for choices between defense and civilian spending in more complex economies.
The "gun or butter" model is generally used as a simplification of national spending as a part of GDP. The nation will have to decide which balance of guns versus butter best fulfill its needs, with its choice being partly influenced by the military spending and military stance of potential opponents. Researchers in political economy have viewed the trade-off between military and consumer spending as a useful predictor of election success.
Origins of the term
One theory on the origin of the concept comes from William Jennings Bryan's resignation as United States Secretary of State in the Wilson Administration. At the outbreak of World War I, the leading global exporter of nitrates for gunpowder was Chile. Chile had maintained neutrality during the war and provided nearly all the USA's nitrate requirements, as it was also the principal ingredient of chemical fertilizer in farming. The export product was sodium nitrate, a salt mined in the northern part of the country.
With substantial popular opinion running against U.S. entry into the war, the Bryan resignation and peace campaign (joined prominently with Henry Ford's efforts) became a banner for local against national interests. Bryan was no more pro-German than Wilson; his motivation was to expose and publicize what he considered to be an unconscionable public policy.
The National Defense Act of 1916 directed the President to select a site for the artificial production of nitrates. It was not until September 1917, several months after the USA entered the war, that Wilson selected Muscle Shoals, Alabama, after more than a year of competition among political rivals. A deadlock in Congress was broken when Senator Ellison D. Smith from South Carolina 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".
Quoted usage of term
Perhaps the best known actual usage (in translation) was in Nazi Germany. In a speech on January 17, 1936, Minister of Propaganda Joseph Goebbels stated: "We can do without butter, but, despite all our love of peace, not without arms. One cannot shoot with butter, but with guns." Sometime in the summer of the same year, Hermann Göring announced in a speech, "Guns will make us powerful; butter will only make us fat."
Vladimir Putin reintroduced the concept to defend military actions in response to criticisms that surfaced during his 2004 re-election campaign.
Prodigy's 1997 album The Fat Of The Land has the following text on the fold-out booklet: "We have no butter, but I ask you /Would you rather have butter or guns? /Shall we import lard or steel? Let me tell you /Preparedness makes us powerful. /Butter merely makes us fat."
Great Society example
United States President Lyndon B. Johnson's Great Society programs in the 1960s is an example 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 in the arms race of the Cold War, and Vietnam War. These put strains on the economy, and hampered his Great Society programs.
- Arms race
- Opportunity cost
- Peace dividend — The amount of civilian goods produced by a decrease in defense spending.
- Revealed preferences
- Hibbs, Douglas (2010). "The 2010 Midterm Election for the US House of Representatives". CEFOS Working Paper 9.
- Mankiw, N. Gregory (2003). Macroeconomics (Fifth ed.). New York: Worth. ISBN 0-7167-5237-9. For GDP model see pp. 15–41.
- The Columbia World of Quotations. Columbia University Press. 1996. ISBN 0-231-10298-4.
- Speech at Kensington Town Hall ("Britain Awake"), Margaret Thatcher Foundation
- Carlton-Ford, Steve. 2009. Major Armed Conflicts, Militarization, and Life Chances: Pooled Time-Series Analysis. Armed Forces & Society, Vol. 36, No. 5
- Heo, Uk and Sung Deuk Hahm. 2006. Politics, Economics, and Defense Spending in South Korea. Armed Forces & Society, Vol. 32, No. 4
- Ward, Michael D., David R. Davis and Steve Chan. 1993. Military Spending and Economic Growth in Taiwan. Armed Forces & Society, Vol. 19, No. 4