Category: 03 Economy

In the attached essay, my very good friend Mike Lofgren raises the question of whether defense spending is good for the economy.  This is a current issue because the threat of defense budget reduction is being countered by arguments asserting that these reductions will push the economy into recession.  More generally, the political addiction to defense spending has been a major contributor to our nation's economic decline and our political stagnation — i.e., what I have called Americas Defense Dependency, the subject of an essay I wrote last November for Counterpunch.  Mike comes at these issues from a different albeit complimentary and equally important angle.

Readers interested in learning more about this important subject will find the work of the late Professor Seymour Melman of Columbia University to be particularly edifying.  In his prescient book, Profits Without Production (Knopf, 1983), Melman explained how the growing militarization of our economy was one of the central causes of the decline in America’s manufacturing competitiveness.  This decline started in  the 1970s, but Melman showed how it grew out of seeds planted by the permanent military mobilization of a huge defense industry in the 1950s.

Chuck Spinney
Marina di Ragusa, Sicilia

Is War Good for the Economy?

Michael S. Lofgren, Huffington Post, Posted: 04/30/2013 12:06 pm

The author is a Former Congressional Staffer and author of The Party is Over: How Republicans Went Crazy, Democrats Became Useless, and the Middle Class Got Shafted

The 1960s comedy show Laugh-In included an occasional sketch in which co-host Dan Rowan played a comic general whose tag-line was “war is good for business!” In an ironic echo of that skit, an April 27 Washington Post story delivers the same message: “A steep slowdown in defense spending tied to the end of the wars in Iraq and Afghanistan is undercutting the country's economic recovery, new government data released Friday revealed.” An 11.5-percent annual drop in Pentagon spending resulted in slower growth in the gross domestic product (GDP) during the first quarter of 2013 than economists expected.

So did the dozen years of war, with all the deaths, destruction, and expense they entailed, have the perverse silver lining of being good for the economy? Most mainstream economists — who, like cynics, know the price of everything and the value of nothing — would answer in the affirmative.

Gross domestic product, which they tend to treat as a surrogate for economic well-being, is only a tote board of all spending that occurs in an economy. Statistics like GDP are arbitrary, subject to incomplete data, and can mislead us about underlying economic conditions. A dollar spent on a cancer cure has the same worth to the GDP as a dollar spent to bribe an Afghan drug lord. This convention can reach absurd lengths, such as massive hurricane damage possibly increasing the GDP: money must be spent just to get conditions back to the way they were, but it counts it as “growth.”

Based on my almost three decades on Capitol Hill, most of them involved in defense budgeting, I can say authoritatively that military spending evokes an almost mystical reverence among many members of Congress. A $325-billion defense program like the F-35, however technically flawed, typically engenders less floor debate than relatively miniscule domestic programs such as the Corporation for Public Broadcasting.

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