How the War Machine Destroys the Economy
Less Bang for the Buck
Military spending drains and distorts the civilian economy
by Thomas E. Woods, Jr.
To get a sense of the impact the U.S. military has on the American economy, we must remember the most important lesson in all of economics: to consider not merely the immediate effects of a proposed government intervention on certain groups, but also its long-term effects on society as a whole. That’s what economist Frédéric Bastiat (1801–50) insisted on in his famous essay, “What Is Seen and What Is Not Seen.” It’s not enough to point to a farm program and say that it grants short-run assistance to the farmers. We can see its effects on farmers. But what does it do to everyone else in the long run?
Seymour Melman (1917–2004), a professor of industrial engineering and operations research at Columbia University, focused much of his energy on the economics of the military-oriented state. Melman’s work amounted to an extended analysis of the true costs not only of war but also of the military establishment itself. As he observed,
Industrial productivity, the foundation of every nation’s economic growth, is eroded by the relentlessly predatory effects of the military economy. …Traditional economic competence of every sort is being eroded by the state capitalist directorate that elevates inefficiency into a national purpose, that disables the market system, that destroys the value of the currency, and that diminishes the decision power of all institutions other than its own.
Throughout the Cold War, politicians and intellectuals all over the political spectrum could be heard warning of the catastrophic economic consequences of reductions in military spending. The radical left in particular, as part of its critique of American state capitalism (which it sometimes conflated with pure laissez-faire), lent important support to that position. As Marxists Paul Baran and Paul Sweezy warned: “If military spending were reduced once again to pre-Second World War proportions, the nation’s economy would return to a state of profound depression, characterized by unemployment rates of 15 per cent and up, such as prevailed during the 1930s.”