10 February 2011

How Military Spending Weakens the Economy

When American Conservative Magazine and a senior fellow of the Ludvig von Mises Institute collaborate to produce a dynamite article that builds on and reinforces the great work of my friend, the late Professor Seymour Melman of Columbia University, a card-carrying liberal, you know it is time to sit up and read it carefully.  

Attached below is a an excellent article describing how the political economy of the Military - Industrial - Congressional Complex drains and distorts the civilian economy.  Melman did the path breaking research in the 1950s and 1960s and 1970s and his warnings about deindustrialization were prophetic.  No less an authority that William Anders, CEO of General Dynamics, confirmed Melman's warnings in spades, when Anders explained to a group of defense contractors in the 1991 why General Dynamics was not going to convert into civilian production after the cold war ended, because “most [weapons manufacturers] don’t bring a competitive ad-vantage to non-defense business,” ... and ... “Frankly, sword makers don’t make good and affordable plowshares.” [see The Domestic Roots of Perpetual War, pages 58-59 & footnotes 4 and 5.]


Military spending drains and distorts the civilian economy.
By Thomas E. Woods Jr.
American Conservative, 1 March 2011
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."