No, Military Keynesianism Does Not Make Us Wealthier

In his latest column, Paul Krugman continues to shill for higher tax rates, claiming that raising taxes somehow will strengthen the economy. I really don't have the time to deal with arguments that we have gone over before, so I will leave it at that. And, yes, Barack Obama won. The economy soon will explode with 12 million new jobs. Bill Clinton said that in a campaign speech, so it must be true.

Instead, I wish to look at a November 4 op-ed in the NYT, "The Permanent Militarization of America," by Aaron B. O'Connell, who teaches history at the U.S. Naval Academy in Annapolis. O'Connell writes that to a certain extent, Dwight Eisenhower's famous warning about the "Military-Industrial Comples" in his farewell speech in January 1961. However, writes O'Connell, much of the government spending in defense has had a positive economic effect and has contributed to economic growth:

The military-industrial complex has not emerged in quite the way Eisenhower envisioned. The United States spends an enormous sum on defense — over $700 billion last year, about half of all military spending in the world — but in terms of our total economy, it has steadily declined to less than 5 percent of gross domestic product from 14 percent in 1953. Defense-related research has not produced an ossified garrison state; in fact, it has yielded a host of beneficial technologies, from the Internet to civilian nuclear power to GPS navigation. The United States has an enormous armaments industry, but it has not hampered employment and economic growth. In fact, Congress’s favorite argument against reducing defense spending is the job loss such cuts would entail.

At one level, he is right. Some new technologies that were developed for the armed forces have found their ways to civilian uses, but the story is much different than what he might think. First, new technologies by themselves are not useful to the economy at large unless entrepreneurs can find a way to integrate these technologies into goods and services that individuals not only find useful, but are willing to give up scarce things in their possession in order to obtain.

Without the entrepreneurial component, vaunted new technologies tend either to be unused or applied in very esoteric ways that have little or no effect upon the general population. Take the Internet, for example. A lot of people have reminded me that government agents developed the first elements of what we know today as the Internet more than 40 years ago. That is true, but also irrelevant.

First, the Internet would not have been invented had entrepreneurs not first developed and applied what we know as telecommunications. I'm sorry folks, but Alexander Graham Bell and those who followed him were not working for the Department of War or Defense. Second, the Internet as we know it was of no commercial or economic use until entrepreneurs both developed and applied technologies like fiber optics and they developed mechanisms by which ordinary people could access what now is a technological and commercial wonder.

Furthermore, O'Connell's claim that this vast amount of government spending "has not hampered employment and economic growth" is one of those "proving a negative" statements. What he really is saying is that since the U.S. economy has been relatively strong since Eisenhower's speech, the diversion of huge amounts of resources from marketable uses to military spending has had no negative economic effects.

One cannot make that statement, economically speaking. First, we don't know if the economy would be stronger than it is now (I believe that it would) had this spending not occurred. Second, for O'Connell to be correct, military spending would have to have moved ALL factors of production from lower-valued to higher-valued uses in all situations involving Pentagon expenditures. If that is not true, then military spending has made us worse off.

No, I am not arguing for complete cessation of military spending. Certainly keeping this country from being invaded is a good use of resources, but that has not been the case with the USA for a long, long time. And, as O'Connell unwittingly notes, members of Congress are violently opposed to cutting any spending in their districts or states because that means some people there lose their jobs, at least in the short run.

But government employment is not the same as economic growth, even if O'Connell cannot see that (and few history professors these days are able to move beyond their own socialistic views). As for the rest of the article, I agree much with him, but I also find it interesting that he completely left out the militarization of the civilian police forces, and the militarization of the enforcement arms of federal agencies.

In fact, other than having our living standards lowered by gargantuan military spending, the one way we will come in meaningful contact with militarization is an encounter with the police. Why am I not surprised that a history professor missed that important point? You supply your own answer.