Tuesday, December 06, 2011

Is The Theory Of Military Keynesianism Wrong?

A long-time argument offered by many on the left for the relatively high employment numbers in the United States during periods when other industrialized countries were suffering economic slumps - the early- to mid-1960's; the late-1980's - was quite often put off on what commentator Noam Chomsky called "Military Keynesianism". Rooted in the macro-economic theories of John Maynard Keynes, the theory was that relatively high spending in defense and related sectors by the federal government created or maintained jobs in related industries while other countries that had relatively smaller military budgets (as well as militaries less beholden to high-tech industry for their existence) couldn't rely on this as an employment stop-gap.

There is a study (.pdf) out of the University of Massachusetts (incorrectly identified as MIT in the Think Progress report where I first read about it) that compares the employment effects of military spending to the employment effects of public spending in other areas. From the abstract:
This study focuses on the employment effects of military spending versus alternative domestic spending priorities, in particular investments in clean energy, health care and education. We first present some simple alternative spending scenarios, namely devoting $1 billion to the military versus the same amount of money spent on clean energy, health care, and
education, as well as for tax cuts which produce increased levels of personal consumption. Our conclusion in assessing such relative employment impacts is straightforward: $1 billion spent on each of the domestic spending priorities will create substantially more jobs within the U.S. economy than would the same $1 billion spent on the military.
This wasn't the only question under scrutiny:
We then examine the pay level of jobs created through these alternative spending priorities and assess the overall welfare impacts of the alternative employment outcomes. We show that investments in clean energy, health care and education create a much larger
number of jobs across all pay ranges, including midrange jobs (paying between $32,000 and $64,000) and high-paying jobs (paying over $64,000). Channeling funds into clean energy, health care and education in an effective way will therefore create significantly greater opportunities for decent employment throughout the U.S. economy than spending the same amount of funds with the military.
Using standard methodology first developed in the 1930's, they conclude that, in large part due to higher non-labor costs military and related industries incur - physical plant and other material capital, land - spending in the other areas under study actually create more, and better-paying, jobs than equivalent spending in the military budget.

A couple things. The military budget is not a jobs budget. While even the most skeptical anti-Keynesian in Congress often pushes strenuously to keep various military projects funded if they are contracted within his or her district out of a concern for jobs, the object of the military budget is to make sure the United States has adequate military defenses to face threats to its interests. Now, the previous sentence is over-loaded with political questions: What is "adequate"? What constitutes a "threat"? What are our "interests"? What is the meaning of "adequate" in the face of these "threats"? While having an analytical component, answering these questions is a matter of politics. Which is as it should be. There is no final arbiter of what is or is not an adequate level of military spending, what our interest are, etc. We have to come to understand these terms together, always with the proviso that they all may change, sometimes in the blink of an eye.

Second, while certainly an important consideration in long-term fiscal planning, especially as we draw down forces in both Iraq and Afghanistan, and consider various options in future force-structure that are adequate to existing and emerging threats as well as take advantage both of the training and abilities of American military personnel and technology, we should not look for immediate economies by thinking solely of the employment effects of relative federal spending levels. It may well be the case, as the study concludes - and the conclusions of this study are the same as its predecessors over the previous decade - that military spending is not as big a job-creating engine as spending in other areas; in tough economic times, some might see an opportunity here not only for fiscal economies but an opportunity to boost employment by more cost-effective public-sector investment. That, to me, would be a mistake. Only after careful examination of current and recent DoD budgets should anyone suggest ways in which future military spending might include some of the conclusions of these studies. That should always be done as a secondary or even tertiary consideration; the first, over-riding concern of Defense spending has to be insuring a defense of the United States.

As to the question of the Theory of Military Keynesianism, it seems that repeated studies over a decade are dealing a blow to the idea, beloved of Congress members with defense contractors in their districts, that, if all else fails, as long as they have a plant building parts for a tank or a plane of a ship, they're fine might want to consider getting money to build a school or maybe even a plant that produces green technology.

Virtual Tin Cup

Amazon Honor System Click Here to Pay Learn More