As European countries join Britain in a huge hike in military spending , economist Michael Burke, explains how this dangerous armaments drive won’t create economic growth, and instead make us poorer and devastate public services.
“At a time of budget cuts, the drum beat for increased military spending is positively dangerous domestically as well as internationally, as it could only occur at the expense of other, useful or productive areas of government spending. It is therefore vital for the protection of public services and public investment that the false arguments in favour of increased military spending are thoroughly rebutted.
Military ‘Keynesianism’
There is an entire body of thought devoted to the idea of promoting military spending as an economic benefit dubbed by its supporters as ‘military Keynesianism’. A vulgarisation of Keynes’ work, supporters suggest any type of government spending is beneficial to the economy, and given that military spending enhances the power and prestige of the country, then military spending should be prioritised.
The ideas behind military Keynesianism were tested to destruction in the Viet Nam war. The US government granted itself unlimited budgets to fight the war and almost bankrupted itself in the process, as well as destroying the Bretton Woods economic system and unleashing global inflation.
A contrary example shows after World War II, when West Germany was not allowed armed forces. It was obliged to use its Marshall Plan funds for economic regeneration, which became known as the German ‘economic miracle’.
In the present drive to rearm, old or discredited ideas are being dusted off to justify the diversion of public funds. These include growing claims on the positive effects on technology, R&D and jobs. These claims are incorrect.
Productive versus unproductive investment
The purpose of investment – Gross Fixed Capital Formation (GFCF) – is either to replace or to supplement the existing level of fixed investment in the economy. It is the additional investment, Net Fixed Capital Formation which augments the existing level of fixed investment in the economy. This represents an increase in what is now usually called the productive capacity of the economy.
Of course, building a factory that is never used or constructing one of Japan’s infamous (but largely mythical) ‘bridges to nowhere’ does not constitute useful or productive investment. The traditional mainstream definition of investment is an outlay on which there is a financial return.
Yet in many cases, government fixed investment will not include a direct financial return at all. This would apply to a new road or railway, or the latest technology in universities. But in each case there is a financial benefit to the users (who are not charged tolls, or in the form of quicker journeys or cheaper fares or who can develop new scientific methods, and so on). But the users will receive a financial benefit which raises prosperity generally. In turn, government will itself usually benefit from their increased economic activity through its ordinary tax receipts.
This highlights the fallacy that there is any potential for prosperity through military spending. The benefits of these other categories of government spending arise because they boost other areas of activity. This is because the bridge, or road, or home is not just a social benefit. It has a monetary benefit to the users and then wider society. But there is no benefit to the wider economy from a tank, a bomb, or a missiles system. There is no benefit in terms of efficiency, speed, productivity to other economic sectors. Economically, military spending is not even a bridge to nowhere.
Military spending – one of lowest ‘employment multipliers’
There is also a widespread yet false claim that military spending is ‘jobs rich’. Since military spending does not add to the productive capacity of the economy, the labour used in the manufacture of weapons is the equivalent of Keynes’ digging holes and filling them in again. It has zero net economic benefit.
In a time of high unemployment, even digging holes and filling them in again can have the effect of a stimulus to wider job-creation (which was Keynes’ ironic point). But if the aim is to create better, higher-skilled, higher wage jobs, then there are far better ways to spend government money.
The military budget is already one of the largest areas of government spending, £53bn in 2022/23, behind only the Departments of Health and Education. It is more than the spending of the Departments of Housing, Transport and Work & Pensions combined.
In terms of direct employment, the MoD employs just under a quarter of a million military and civilian staff. But the claims made for military spending being ‘jobs rich’ rely on assertions about the effect of MoD procurement on creating jobs in the private sector arms industries and related services.
It would be easy to get bogged down in highly technical analyses in this area. Thankfully this work has been down elsewhere, for the Scottish Government, on what are known as ‘employment multiplier effects’. This is an analysis of the structure of the economy which shows the relationships between inputs and outputs in the economy. A full explanation of this analysis is shown here.
It concludes that military spending has one of the lowest ‘employment multipliers’ of all economic categories. It ranks 70th in terms of the employment it generates, out of 100. Health is rated number 1. Everything from agriculture to energy to food manufacture, chemicals, iron and steel, to computers, construction, and a host of others in between all have greater ‘employment multipliers’ than military spending. Investing in health is two and half times more ‘jobs rich’ than investment in military spending.
Conclusion
The frenzy for increased military spending has generated an enormous number of spurious claims about its alleged economic benefits. Since the outputs of military spending serve no wider economic purpose, these claims are clearly false. In terms of generating prosperity, military spending is completely wasteful government spending. The related claim that military spending generates jobs exaggerates its effects. Many other sectors of the economy are far more ‘jobs rich’ and have a wider economic better, such as health, construction, food and many manufacturing sectors. The logic of government investment to restore prosperity and generate higher-skilled and paid jobs should be applied to these sectors instead.
The full version of this article was originally published in Socialist Economic Bulletin.