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 be used "in the interests of peace and prosperity" instead of "war and destruction". An example of such policies are the Public Works Administration in the 1930s in the United States.
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.
|“||Thus as the prime mover in the first stage of the technique of recovery I lay overwhelming emphasis on the increase of national purchasing power resulting from governmental expenditure which is financed by Loans and not by taxing present incomes. Nothing else counts in comparison with this. In a boom inflation can be caused by allowing unlimited credit to support the excited enthusiasm of business speculators. But in a slump governmental Loan expenditure is the only sure means of securing quickly a rising output at rising prices. That is why a war has always caused intense industrial activity. In the past orthodox finance has regarded a war as the only legitimate excuse for creating employment by governmental expenditure. You, Mr President, having cast off such fetters, are free to engage in the interests of peace and prosperity the technique which hitherto has only been allowed to serve the purposes of war and destruction.||”|
|This section does not cite any references or sources. (February 2013)|
The economic effects advanced by supporters of military Keynesianism can be broken down into four areas, two on the demand side and two on the supply side.
On the demand side, increased military demand for goods and services is generated directly by government spending. Secondly, this direct spending induces a multiplier effect of general consumer spending. These two effects are directly in line with general Keynesian economic doctrine.
On the supply side, the maintenance of a standing army removes many workers from the civilian workforce. In the United States, enlistment is touted as offering direct opportunities for education or skill acquisition.
Also on the supply side, it is argued that military spending on research and development (R&D) increases the productivity of the civilian sector by generating new infrastructure and advanced technology. Frequently cited examples of technology developed partly or wholly through military funding but later applied in civilian settings include computers, aviation (particularly regarding helicopters and supersonic travel), radar, nuclear power, and the internet.
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.
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.
Forms of military Keynesianism
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.
- 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.
- 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.
- Custers, Peter (2010). "Military Keynesianism today: an innovative discourse". Race & Class 51 (4): 79–94.
- Veronique de Rugy (December 2012). "Military Keynesians". Reason magazine (Reason Foundation). Retrieved 2 February 2013.
- Keynes, John (1933). "An Open Letter to President Roosevelt". Retrieved 2011-08-01. Unknown parameter
- Noam Chomsky (February 1993). "The Pentagon System". Z Magazine (Reason).
- Custers P. (2010). Military Keynesianism today: an innovative discourse, Institute of Race Relations, Vol. 51(4): 79–94 Available from 10.1177/0306396810363049 http://rac.sagepub.com [Accessed March 2011].
- Cheap Wars by Jonathan Nitzan, Ph.D. Associate Professor of Political Economy, and Shimshon Bichler, Lecturer of Political Economy
- Defense Doesn't Need Stimulus by Christopher Preble, Ph.D. History
- Doesn't all the war spending stimulate the economy? And shouldn't the Bush tax cuts do the same? So why are we falling into recession? Dollars & Sense magazine
- Military Keynesianism to the Rescue? by Robert Higgs, Ph.D. Professor Emeritus of Economics
- Rich Nation, Strong Army: National Security and the Technological Transformation of Japan by Richard J. Samuels, Ph.D. Professor of Political Science
- The economic disaster that is military Keynesianism: Why the US has really gone broke by Dr.Chalmers Johnson in the English edition of Le Monde Diplomatique
- ROBERT B. REICH
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