dunne political economy military expenditure an introduction

8/6/2019 Dunne Political Economy Military Expenditure an Introduction

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Cambridge Journal ofEconomics 1990 ,14 ,395-404

Tlh p o l i t i c a l


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396 P. Dun ne

economic costs. This was followed bya considerable debate in the liter ature , including ananalysis of military spen ding in the U S by Griffinet al. (1982) published in the CJE (seeChan, 1986 for a survey). Deba tewas further fuelledby Gold (1990),who in surveying theempirical literature argued that there isno evidenceto suggest that m ilitary spendinghas anegative impact on economic growth. Meanwhile, contributions froma Marxist traditionhave argued that defence spending stimu lates economic growth b y, for instance, preventing crises, or by acting as an informal industrial policy, exactly the line of reasoningattacked in Smith (1977) (see e.g. Cypher, 1987A and Pivetti, 1989). The contributionto this symposium reflect this debate about the nature, determinants, and economicconsequences of military ex pend iture, including its wider socioeconomic implications.

The importance of m ilitary spendingHigh levels of military expen diture are one aspect ofa more general phenomena termed'militarism', which despite its substantive importanceto , and impact on, modern societyhas been peripheralto most econom ic theories andschools of thought. Whilethe nature ofmilitarism as a conceptis controversial,there is no doubt tha t m ilitaristic phenomena haveimportant economic consequences.1 Any analysis of these consequences will, however,be sensitive to the theoretical un derstand ing of the role of military spending in economi

development andwill be constrainedby the fact that economic theories provid eno role forit as a distinctive type of economic activity.

A major problem with analysing military expenditure is that of measurement. Incommon with other forms of government expenditure, it is an input to a process. AsBlackaby(1987) emphasises, however,unlike other government expenditures itis imposs-ible to quantify the objective of military expenditure (see also Carr-Hill, 1986). It buyarmed forces, weapons and soldiers, that providea military capab ility, the ability to fightand win, which the state uses to promote its security objectives. While spending andforces are measurable, capability, which is only revealed in conflict, and security arenot. In contrast, health, for example, is in principle measurable and the contribution aneconomist mightmake to the efficient allocation of resources for h ealthcare may be guidedby suitable indices of output or quality. Any cuts in health expenditure can be seen asreducing these measures of health and is a clear reduction in investment in the sociainfrastructure. In producing security, however, it is the perception of threat that isimpo rtant. The end of the Cold W ar, tothe extent that tensionhas been alleviated, reducesthe resources required to achieve the same level of security and the peace dividendemerges as a windfall g ain.

Although the share of military spending in G DPhas tended to decline since the KoreanWar, it remains an important component of government spending in the OEG D, with awide dispersion among countries, with the US, Greece and the UK having the largestshare (see Tab le 1). Table 1 also shows thatwhile total military expenditu re increased overthe period the mean share declined steadily, though the experiences of individualcountries differ. Since the mid-seventies the picture had changed little, the mean sharehaving fallen from 3-2 to3-1.

1 See for example Geyer (19 90), Ma im (198 7), Shaw (1984) and Mackenzie (1983). Sm ith (1983) provide

definition o f militarismas a portmanteau term coveringa number of separate phenomena including high levelsof m ilitary spending, the militarisation o f domestic social relations, tendencies towards war and the use offorce in international relations, and the nucleararms race. Th ese are seen as having no real structural relationbetween them except that each involves the military.


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The political economy of military expend itureTab le 1 .OECD military expenditure (% of GDP)

397

AustraliaAustriaBelgiumOanndflDenmarkFinlandFranceGermanyGreeceItalyJapanLuxembourgNether landsNew ZealandNorwayPortugalSpainSweden

SwitzerlandTurkeyU KU SYugoslavia

Al l OE CD countriesMean shareStandard deviationTota l expendi tureMean expendi ture

1955

3-80-23-86-33-21 66 44 15 12-43 25-72-43-94-21 14-5

2-85-68 1

1 0 08-9

4-22-5

195-98-5

1965

3 01 23 02 92-81-75-24-33 53 11 01-44 02 03-86-21-44-2

2-55 05-87-45-4

3-51-7

233-910-2

1975

2-31 03 11-92-51-23-83-76-82-50-90-93 21 63 25-32 13-2

2 06 35-25-85-9

3-21-8

2 6 6 21 16

1985

3 01-32-92 22 21-44 13-27 12-71 00-93 12 13 13-22-23 0

2-34-55-26-93-9

3 11-6

3 6 4 115-8

Notes: (1) Military expenditure is based on NATO definition; (2)expenditures are in US 81000 million 1980.

Source: International Institute for Strategic Studies (Annual).

Another way of assessing the significance of military expenditure is to look at theemployment it supports, both directly and indirectly. The indirect effects have to beestimated using some form of inpu t-output model. D unn e (1986) provides summaries of anumber of country studies showing a wide dispersion in employment dependent on thelevel of military expenditure. While the proportion of the labour force supported bymilitary sp ending is not particularly large at unde r 5% , there are marked differences inregional and industrial concentration and th e military sector often has higher wages andhigher skill and qualification levels than the rest of th e econo my. Military exp enditure canalso represent an important component of trade. In the 1980s, trade in conventionalweapons has fluctuated between $3 0 billionand a peak of $39 billion in 1987 (Anthony andWulf, 1990).

But it remains true that the magnitude o f military spend ing does not providea measureof its overall importance to the global econom y. Itis necessary to consider its impacton th epace and character of economic development. This requires an understanding of the


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398 P. Dunne

specific role of military expenditure in the economy and in society in general. The nexsection w ill briefly survey the most commonly adop ted approaches.

Military expenditure and the economyIn considering military expenditure and its role within the economy itis useful, followingSmith (1977),to distinguish th ree approaches, the neoclassical, the critical liberal and th e

M arxis t. W hile it is difficult to draw clear boundaries between these approaches, they dohave certain distinguishing characteristics(see also Georg iou, 1983).The neoclassical approach to military expenditure is based upon the notion ofa state,

reflecting some form of social democratic consensus, recognising some well-definednational interest, and threatened by some real or apparent potential enemy. Given theexternal p otential enemy it is necessaryto deter aggression andthis is done by developingaparticular level of capability which is derived from some optimisation procedure. Gametheo retic m odels reflecting, in a limited way, inter-sta te behaviour have become fashionable. H igh m ilitary spending is here the result ofchanges in technology, rising costs andarms races. These models correspondto what is known as the 'rational acto r' model of thestate in political science and are discussed in Gleditsch and Njolstad (1990).

While this approachallows formal models to be developed, it canbe criticised for beingahistoric and always able to justify observed actions. It can also place rather extremerequirements of computation and knowledge on actors. Moreover, secrecy, conflict ofinterest groups, and the uncertainty of international relations,make the idea of developinga nation al consensus seem rather un real. In add ition, as the only true test of a strategy iwar fortunately the models can seldom be tested .

Military expenditure is also seen as important for New Classical economics, in adynamic context,in that it can provideshocks to the system. For example, Hall(1988) usesmilitary expenditureas an exogenous instrum ent to test for thedegree of monopoly in theU S , while B arro (1981) finds hat increases in military expenditure have substantial realeffects on output.

T he liberal approach hinges on the nature of the 'military industrial complex' with itsconflicting interest groups which leadto internal pressures for military spending, externalthreats simply providing a justification. In this approach there is still some nationalinterest but it is distorted by vested interests. Military spending can be seen simply as aburden, or bothas a burden andas having a adverse effect on the civilian sector (Melman ,1985; Du ma s, 1986).

In contrast, the Marxist approach sees the role of military expenditure in thedevelopm ent of capitalismas much w ider andmore pervasive, withthe 'military industrialcomplex' constrainedby the laws of motion of the capitalist system. Marxin fact had littleto say on militarism and it is really Engels inAnti-Duhring who provides the classicanalysis.1 The work of Lenin, Luxemburg and Kautsky developed the classical Marxistposition.2

Within the Marxist approach thereare a num ber of strands which tend to differ in theirtreatment ofcrisis and in the extent to which they see military expend itureas necessary forcapital accumulation. In the context of crisis theory it is not clear what effect militaryexpend iture might have. Itcan act as a countervailing tendencyto the falling rate of profit

1

Th ey were both in fact heavily influenced b y Q ause witz in their attitude to war.2 A debate over Marx's and the Ma rxist analysis of militarism has recently taken place between Gottheil(1986), Riddel (1986), Cypher (1987B) and Miller (1987), Gottheil arguing that the Marxist literature onmilitary spending is inconsistent with M arx's analysis of capitalism and the others responding critically.


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theoretical break required to arrive at an underconsumptionist position. This, in conjunc-tion with certain obviou sly appealing conclusions, has sufficed to ensure their continuingpopularity. Bleaney (1976) provides a critical survey of the underconsumptionistapproach and Pivetti (1989) providesa recent example of the undercon sumptionist view ofthe econ omic effects of military spending.

Th e rejection of the underconsumptionist approach in Sm ith (1977) imp lied that it wasnecessary to analyse the relation between military expenditure and accumulation as acomp lex historical process, whichis a contingent, rather than a deterministic relationship:a complex process of dialectical interaction, which plays a contradictory role in beingimportant to capitalism but imposing economic costs. Since then the issue of hegemonyand the p otentially contradictory role of the military has b een th e subject of considerabledebate, particularly within the international political economy literature (e.g. Gilpin,1987; Strange, 1988). The issue attracted most attention with the analysis of the inter-action of military and economic factors in the historic rise and fall of the great powers(Kennedy, 1988).

There have been various other developments in the Marxist analysis of crisis whichare surveyed in Dunne (1991) but none of them has explicitly focused on the issue omilitarism. One of the most influential of these has been from the work of the Frenchregulation school which analyses capitalism as a series of epochs based upon specific

regimes of accumulation, which has distinctive social relations of production.1

Thisapproach has been developed by others, such as Glynet al. (1990), but has failed to seemilitary spending as having an essential role other than as one facet of US hegemonywhich was a factor in creating the post-Second World War 'Golden Age'. Lovering'spaper in this sy mpo sium u ses this general approach, albeit ina critical man ner, to analysethe UK defence industry.

Macroecomomic e ffec ts

The complex nature of military expenditure and its contradictory role in capitalistaccumulation im ply that there are economic costs to military spend ing. Analyses of theseeffects will be contingent on other economic and social variables and on historical conditions. The answer to the question 'what is the effect of military expenditure?' is 'it

dep end s' and the problem is to specify up on what it dep ends. It thus becomes difficult tomake general statements on the basis of empirical work and necessary to undertake theanalysis at both an abstract aggregate level and at specific disaggregate levels within theeconomy.

Give n a particular level of produ ctive capacity the resources for military expenditurecan be obtained at the expense of consumption, investment, other government expendi-tures, or the balance of payments. T he state has considerable control over the resourcesthus 'crowded out*. In Smith (1977) negative correlations betw een the share of militaryexpenditure and investmen t and growth were found. In fact there are also considerabledifferences in the individual country results and the paper here by Edelstein whichconsiders time-series data for the US shows that, while the crowding out of investment bymilitary spending migh t have been the case for the U Sat various junctures, in the long runmilitary expenditure has tended to be at the expense of consumption expenditure, theburden shifting betw een the private and public sectors. H e argues that researchers on the

1 See Aglietta (19 79) and LJpietz (1987) for an exposition an d Clarice (1988) for a critique.


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402 P. Dunne

Changes in m ilitary spending

While an understanding of the nature and impacts of military spending is a necessarycondition for understanding the impact of defence cuts, it is not sufficient. These aremargin al changes requiring structu ral adjustment andare contingent both onthe particu-lar situation and present and future policies. In considering the move to lower levels omilitary spending, the issue of conversion will present problems at all of these levels

Simple macroeconomic studies of th e economic effects of military expenditure are thusrathe r lim ited. A more disaggregate analysis, however, needs a clear framework and thisrequires the use of some form of disaggregated model, formal or informal. The almostunanim ous conclusion of disaggregate studiesis that in economic terms disarmamentis anopportun ity not a problem.1

Willet the n considers the issues involved in analysing the conversion from military tocivilian produc tionin the U K. H aving assessedthe likely magnitude ofthe peace dividendshe criticises studies which assume away the problems of transition for their failure tounderstand the problems involved and the potential resource loss. Distinguishing theeconomic and the political economy approaches to th e analysis of conversion, she tries tofuse elements of the latter w ith concerns forthe environmental impact of economic devel-opm ent. In this way she suggests that the Left's approach to conversion policy should bmo re aware of the im portance of breaking both with the relations of produ ction inherentinweapons' production and with the dominant materialist ideology. The wider social andeconomic effects of military spending are important and often neglected. Th ey are oftendifficult or impossible to quantify. Some may notbe selfevident, given their position in thespecific historical developmen t of a country's cu lture. Th e paper by O wens addresses aninteresting example of the often u nnoticed environmental effects of military expend ituremilitary live firing n the UK s national parks. She brings an environmentalist's perspec-tive to the costs and benefits involved in the use of a culturally important resource formilitary purposes.

ConclusionTo sum u p, the changes in European security provide an opportunity for the cutting ofdefence spen ding, the demilitarisation of society anda questioning of the whole m ilitarist

fabric of capitalist development. There are economic opportunities, but achieving themmay no t be easy orcostless.The y are both important and complex, and the contributionsto this symposium should provide an input to this debate.

BibliographyAglietta, M. 1976.Theory of Capitalist Regulation: the U S Experience,London, VersoAntho ny, L an d W ulf ,H . 1990. Th e trade in conventional weapons, in SIPRIWorld Armaments and

Disarmaments Yearbook, Oxford, Oxford University PressBall, N . 1989.Security and Economy in the Th irdWorld, Lo n d o n , A d aman t in eBaran , P. and Sweezy, P. 1966.Monopoly Capital, Lon don, Month ly Review PressBarker, T. , Dunn e, P. and S mith , R.1991. Measur ing the peace d iv idend in the United Kingdom ,

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Analysis, London, Macmillan1 See, for example, Paukert and Richards (1991) and D unne(1986) which provide surveys of some country

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dunne political economy military expenditure an introduction

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