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February 2002

Mitchell, Schoeffel, eds: Understanding Power: The Indispensable Chomsky: Ch. 3: The Permanent War Economy: note 10

10. On the importance of military spending as a cushion under the economy, see for example, Frank Kofsky, Harry S. Truman and the War Scare of 1948: A Successful Campaign to Deceive the Nation, New York: St. Martin's, 1993. An excerpt (pp. 258-260):

In supporting bigger armaments budgets, business journals repeatedly returned to the idea that military procurement could prevent or overcome recessions by keeping overall levels of spending high. Even as early as the spring of 1948, The Magazine of Wall Street was beginning to cast the matter in exactly those terms: "In fact, the contemplated scale of spending . . . may be just enough, together with tax reduction and other outlays such as foreign aid, to act as a cushion against a business decline" [see E.A. Krauss, "The Effect on Our Economy," Magazine of Wall Street, April 24, 1948, pp. 60, 100]. . . . "In a broad manner, the enlarged Government spending will inject new strength into the entire economy" [see Frederick K. Dodge, "Which Securities under Preparedness?," Magazine of Wall Street, April 24, 1948, p. 98]. . . .

Later in the year, Business Week gave this idea its official imprimatur [see "Where's That War Boom," Business Week, October 30, 1948, p. 23]. . . . "Industrialists generally are in accord with the military's program of preparedness," Steel noted as early as April of 1948, specifically citing "C.E. Wilson, president of General Electric Co.," as a case in point [see "Industry Sizing Up New Military Program, Steel, April 5, 1948, p. 46]. . . . "The country is now geared to a $13-billion military budget," [Business Week] noted . . . "a big -- and reliable -- prop under business. For the country as a whole," a Pentagon budget of this size guaranteed "a high level of federal spending," while for "individual suppliers, it means a solid backlog of orders" [see "Defense Buying Hits Stride," Business Week, March 18, 1950, pp. 19-20]. The following month, the editors again drew the connection between fueling the arms race and maintaining a stable capitalist order: "Pressure for more government spending is mounting. And the prospect is that Congress will give in. . . . The reason is a combination of concern over tense Russian relations, and growing fear of a rising level of unemployment here at home" [see "Washington Outlook," Business Week, April 15, 1950, p. 15].

This important function of military spending in the economy continues to the present. For one study of its influence, see Maryellen R. Kelley and Todd A. Watkins, "The myth of the specialized military contractor," Technology Review, April 1, 1995, pp. 52f. An excerpt:

[O]ur research indicates that the image of a few highly specialized defense contractors occupying an enclave walled off from commercial manufacturing is largely a myth. . . . [T]he vast majority of defense contractors serve both military and civilian customers. What's more, strengths developed under the umbrella of national security are being tapped to benefit firms' commercial work, and vice versa. . . . Far from being responsible for most of the nation's military manufacturing, [the] major defense contractors stand at the top of diverse and deep supply structures. . . . This supplier base encompasses a significant percentage of all U.S. manufacturing companies. In a 1991 survey of firms in 21 durable goods industries, as well as an analysis of 1988 data gathered by the Census Bureau, we found that fully half of all plants make parts, components, or materials for military equipment.

See also, Maryellen Kelley and Todd A. Watkins, "In from the cold: prospects for the conversion of the defense industrial base," Science, April 28, 1995, pp. 525f; Karen Pennar, "Pentagon Spending Is the Economy's Biggest Gun," Business Week, October 21, 1985, pp. 60, 64 ("Big [armaments] contractors like Lockheed and McDonnell Douglas like to use defense spending as a cushion for times when other business gets weak"). And see footnotes 3, 4, 7 and 9 of this chapter; and chapter 10 of U.P. and its footnotes 22 and 23.

Chomsky points out that military-Keynesian initiatives have not been limited to the U.S. defense budget: a substantial proportion of the U.S. foreign aid budget is devoted to direct grants or loans to foreign governments for the purchase of U.S. military equipment, and there are many other programs shaped to serve the same ends. On U.S. armaments exports and the scale of U.S. military spending, see chapter 8 of U.P. and its footnote 75.