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 may buy either guns (invest in defense/military) or butter (invest in production of goods), or a combination of both. This may be seen as an analogy for choices between defense and civilian spending in more complex economies.
The "guns or butter" model is used generally as a simplification of national spending as a part of GDP. 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 have viewed the trade-off between military and consumer spending as a useful predictor of election success.
Origin 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 of the USA's nitrate requirements. It also was the principal ingredient of chemical fertilizer in farming. The export product was sodium nitrate, a salt mined in the northern part of Chile that often is referred to as Chile saltpeter.
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 versus 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 within the United States. 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 use of term
Perhaps the best known use of the phrase (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." Referencing the same concept, sometime in the summer of the same year another Nazi official, Hermann Göring, announced in a speech, "Guns will make us powerful; butter will only make us fat."
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 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 also was in the arms race of the Cold War, and Vietnam War. These wars put strains on the economy and hampered his Great Society programs.
This is in stark contrast to Dwight D Eisenhower's own objections to the expansion and endless warfare of the military industrial complex. In his Chance for Peace speech, he referred to this very trade-off, 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?— Speech to the American Society of Newspaper Editors "The Chance for Peace" (16 April 1953)
- 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.
- "Guns or Butter". Political-economy.com. 2011-11-24. Retrieved 2016-01-23.
- "Chile Nitrates Exports". American.edu. 1994-03-09. Retrieved 2016-01-23.
- The Columbia World of Quotations. Columbia University Press. 1996. ISBN 0-231-10298-4.
- "Protest at home - Lyndon B. Johnson - war, domestic". Presidentprofiles.com. Retrieved 2016-01-23.
- Speech at Kensington Town Hall ("Britain Awake"), Margaret Thatcher Foundation
- "Prodigy* - The Fat Of The Land (CD, Album)". Discogs.com. 2004-05-31. Retrieved 2016-01-23.
- 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