Wars have become too cheap to boost growth
from Shimshon Bichler and Jonathan Nitzan
This week, with the Federal Reserve Banks of New York and Atlanta anticipating sharply lower GDP growth for 2019:Q1, President Trump presented a ‘Budget for A Better America’, calling for a smaller government and a bigger military.
Forty years ago, the very same call was hailed as the best recipe for renewed growth. The U.S. ruling class was getting ready to install Ronald Reagan as President, abandon the Cold War and embark on neoliberalism, and it argued that, for that shift to succeed, the country needed a leaner government in order to unleash its entrepreneurial spirit and crowd-in private investment, and that it required a strong military in order to boost its global muscle and open world markets for its products and capital.
Ideology aside, one key reason for the growth optimism of the time was rising military spending: as the enclosed figure suggests, over the past century U.S. GDP growth has moved in tandem with the GDP share of military spending (Pearson Correlation Coefficient = +0.59).
This positive correlation continues to hold in Trump’s world – with an important caveat. While the absolute dollar size of the country’s military budget today is larger than ever, its GDP share is smaller than at any time during the post-war era: from 1991 to 2018, military expenditures amounted, on average, to 4.7% of GDP – compared to an average of 9.4% between 1950 and 1990.
Now, if the correlation shown in the chart isn’t spurious – in other words, if higher U.S. growth indeed depends on a larger share of the country’s GDP going to the military – America’s growth prospects look dim.
And the reason is simple: military spending has become increasingly difficult to raise, even for an autocratic president like Trump.
The ongoing development of military technologies and the increasing destructiveness of modern weapons have made contemporary wars – particularly against lesser enemies – progressively cheaper to prepare for and fight (note how the massive entanglement in Iraq and Afghanistan created no more than a blip on the red solid series). And as the means of destruction grow evermore potent and the cost of killing, maiming and incapacitating fall lower and lower, the ability of U.S. governments to justify and legitimize higher military spending declines.
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Real-World Economics Review Blog 
A nice illustration of the folly of using GDP as a measure of anything desirable.
Let’s spend money blowing things up because that will boost “the economy” (meaning the GDP).
Let’s pay someone to dig holes and someone else to fill them in again. It would boost “the economy”. At least it wouldn’t cause any harm.
Interestingly, since about 1998, GDP growth and percentage of military outlays seem to be negatively correlated, whereas prior to that period they seemed to be always positively correlated.
This can be observed visually on the chart and would require some numerical confirmation, but it could indicate that something fundamental changed during the 1990s — in the composition of the GDP, or in the way the USA wage wars.
You may be demanding too much from a century-long +0.59 correlation coefficient. The late 1940s and then the late 50s early 60s are similar patches of inverse correlation.
It is extraordinary how trillions of dollars have been used to develop war machinery that has been devastating whole regions and peoples. The weapons, their ability to kill, maim and disappear without a trace are topics that are rarely discussed. So, thank you for this. At least it acknowledges something pertinent to the economic dialogue.
Jonathan Nitzan,
This seems to be the only way I can get a comment to you about your work and CasP’s work. I cannot register on the CasP site as the reCaptchya V1 is shut down. It seems from their site that they are up to V3. Is this the reason there are few comments on the CasP forum, I wonder? I contacted CasP on the Contact form but there has been no update to enable the Register process. I would like to engage more with CasP, as a freethinking citizen who is highly sceptical of the justifications and prescriptive theories of economic orthodoxy: meaning late stage monopoly financial capitalism and neoliberalism.
To place this in context, you copied a comment of mine from John Quiggin’s blog and placed it on the CasP forum.This is fine but I can’t directly comment on the CasP forum due to the issue outlined above.
I apologise to all here for not keeping my comment on topic. I do intend to comment more on RWER. My last (and only comment, I think) was on “Polanyi and Keynes on the idea of ‘self-adjusting’ markets”. That comment gives a flavor of my position.
Thank you very much for alerting me to the problem. I will look into it ASAP. In the meantime, you can email me if you wish at
Ikonoclast: my email address was automatically deleted from my note above; please find it on the home page of The Bichler & Nitzan Archives http://bnarchives.yorku.ca.
Ikonoclast, please find my contact details on the home page of The Bichler & Nitzan Archives. (Apologies for the RWERB readership….)
Thank you J.N.
On topic, I do recall reading some time ago that for the price of a US fighter jet, a town hospital in Africa could be built and stocked. Then for the price of maintaining the fighter jet, including deployments, the hospital could be staffed, maintained, supplied and run. In terms of orders of magnitude that sounds about right to me. At a cost of $1 million per bed (more like Western than African prices) that would have got a 35 bed hospital when the statement was written and maybe a 100 bed hospital now unless hospital construction costs have blown out as much as fighter jet costs (which I doubt).
Given these kind of plausible estimates, one has to wonder at the predilection for conventional military hardware over health and education, for example. Since killing is getting too effective and cheap to stimulate the economy, on the Bichler / Nitzan analysis, then maybe infrastructure, renewable energy, health and education investments would do it. Certainly sounds like its worth a try. Since, North Korea’s 12 to 24 nukes (about) is enough to dissuade anybody from attacking it, the extant arsenals of the great powers are adequate many times over. There is no need for a very large conventional military unless a power intends to run expeditionary “adventures”, best characterized as disasters for all concerned.
Political-economy (national) expeditions and colonization made some imperial sense (though no moral sense) in a world not so filled and populated as it is now and where target regions were relatively even more backward due to unequal development around the industrial revolution era. Also, imperial rivals in different geographical positions did not always have equivalent and global geographical reach in that era. These factors are all much closer to being nullified now in a more filled and fully exploited world (population times x affluence x technology) and also a relatively smaller world (re communications and transport technologies). A Realist geostrategy thinktank might figure this out, one would think. But no, the geostrategists like the generals prepare for the last conflict not the next conflict; let alone preparing for next conflict avoidance as an alternative.
Are you familiar with this discussion?:
John Walker, Harold Vatter- The Princess & the Pea or, the Alleged Vietnam War Origins of the Current Inflation- Journal of Economic Issues 16- 2 (1982)
Comment: Charles Garrison, Anne Mayhew- The Alleged Vietnam War Origins of the Current Inflation: A Comment- Journal of Economic Issues 17- 1 (1983)
Reply: John Walker, Harold Vatter- Demonstrating the Undemonstrable: A Reply to Garrison & Mayhew- Journal of Economic Issues 17- 1 (1983)
Vatter & Walker have an outlook similar to yours. They argue that the VIetnam War “was economically trivial as a macroeconomic event.” and end their reply with:
1. Walter and Vatter write about the short-term effect of military spending on inflation, whereas our chart here focuses on its long-term effect on GDP growth.
2. Walter and Vatter employ a conventional macroeconomic perspective, which is very different from our own differential-accumulation approach.
On the latter point, see:
Nitzan, Jonathan, and Shimshon Bichler. 2002. The Global Political Economy of Israel. London: Pluto Press, Ch. 5: The Weapondollar-Petrodollar Coalition. http://bnarchives.yorku.ca/8/
Bichler, Shimshon, and Jonathan Nitzan. 2004. Dominant Capital and the New Wars. Journal of World-Systems Research 10 (2, August): 255-327. http://bnarchives.yorku.ca/1/
Nitzan, Jonathan, and Shimshon Bichler. 2006. New Imperialism or New Capitalism? Review XXIX (1, April): 1-86. http://bnarchives.yorku.ca/203/
“And as the means of destruction grow evermore potent and the cost of killing, maiming and incapacitating fall lower and lower, the ability of U.S. governments to justify and legitimize higher military spending declines.” This is quite so. And is why Republicans, in particular, and even Democrats sometimes invent badder and more unbeatable enemies for the USA to counter. ISIS, for example is dangerous on a world-wide scale. But its threat never justified the deployment of US or European troops in the Middle East. Currently, Trump has added China to the bad, bad guys facing the US. Again, China is dangerous, but it has no interest in a war with any western nation, let alone the US. So, who does the US need to counter with it 2.2 million soldiers, marines, sailors, and air force, its approximate 14,000 military aircraft, and its 10 aircraft carriers, nine amphibious assault ships, 22 cruisers, 62 destroyers, 17 frigates and 72 submarines divided into 288 battle groups? But for the soldiers, marines, and sailors these by far are the largest military forces in the world. China and North Korea have larger standing armies, but they have lots of enemies. The USA’s desire to build such an arsenal began just after WWII and grew ever larger during the Cold War. Any ambitious or unstable President considered it his playground. Ronald Reagan used it to “invade” Grenada in 1983, citing as his reason that Cuba was gaining influence in the island nation. Bill Clinton sent it into Somalia and Rwanda, Bosnia, Herzegovina, and Kosovo in the former Yugoslavia, and Haiti, to “protect civilians during civil war.” And, George W. Bush, of course began two bloody wars in Iraqi and Afghanistan that continue today. During the Cold War the USSR and the USA were both bullies, forcing other nations to toe whatever line of action either considered necessary. But many learned to play the bullies off one another, thus preserving their own independence. But now with only one bully left, activist US Presidents search for ways to justify the massive US military spending. For these Presidents attacking China, North Korea, or even Mexico might be tempting. Believe it or not this would not be the most stupid action ever attempted by a US President.