Trahison Des Clercs

The Arms Trade: Peddling death, profiteering from oblivion! An industry characterised by git and gimp. We can play these sorts of emotive value games all day. There’s no doubt that can be splendid fun. From doom to gloom, we can wile our time away bellowing about the despicable diseased dragoons that gallop our society towards heinous horror. However, how about some rational economic thought? Just for a change! It’s about time that we avoided the primitive elements amongst us: from the left’s lower-lip trembling ‘don’t forget the children’ to the right’s rancid righteousness. To appreciate the arms trade, and therefore the more specific topics of military expenditure and arms production that live within it, there must be a concerted attempt to understand the impact that the military sector has on economic outcome. Are these effects negative? Can we rationally attack the sector by referring to the costs that it imposes on our economies?

Orthodox economics tends towards drudgery. Fundamentals are not debated and the economist refuses to accept the probability of mistake, misbelief, misconception, miscalculation and assorted other words beginning with the miserable m. However, defence economics is victorious in its vivaciousness. The political economy encompasses a number of political economic schools and we’re able to offer proper critical appraisal. We can compare, contrast; we can accept and appreciate. So let’s have a go and start with a simple account of the available theory.

Neoclassical theory provides us with the notion of ‘market failure’, the bane of the limp-wristed libertarian. The understanding of defence economics becomes side-lined to understanding the factors that determine market optimality. Thus, we can refer to the delivery of the ‘national defence’ good which, due to public good characteristics, will at best be under-provided by the private sector. The rationale is straight-forward: the good has the characteristics of non-excludability and non-rivalry. The profit maximisation objective can no longer be trusted to deliver the nirvana of the exhaustion of mutually beneficial exchange. The naughty ole ‘free riders’ will take advantage of the public good characteristics and refuse to contribute. Who said there’s no such thing as a free lunch?

But is there any problem with this stuff? As usual with Neoclassical 101, we have to stamp our feet and note its over-reliance on the world of textbook curiosity. Can the military really be defined in terms of a public good? Consider its history: from massacring protestors to providing willing scabs to break strikes, the beneficiaries from military sector investment are clearly not even. Exclusion is actually the norm. We’d have to refer to Marxist games about the importance of class and the military’s role in class conflict. This then opens up the need to consider the alternative schools of thought. We have no need to restrict our understanding of economics to just the rant of the theorist that attempts to try and explain away all behaviour as constrained maximisation.

I’m going to separate the alternative analysis according to their relative beef about the bile generated by the military madmen. We’ll start with something that gets the libertarian in an excited state: liberalism. I’m not talking about the modern liberal voter: i.e. “lets put a penny on income tax and make everything scrummy”. I’m talking here about the cheer leaders for ‘limited government’. Here, we have to focus on the high risk of over-expenditure on the military. It is argued that the selfish economic agents will take advantage of the concentration of resources generated by government provision. Why bother to limit the military sector according to the appropriate concerns about national defence? There is ample opportunity to manipulate politicians to ensure unnecessary redistribution: from the poor ole taxpayer to the arms producing cigar smoker. If this stuff floats your pedal pleasure craft, then your worried brow will be busy getting wrinkled over the means to minimise the magnitude of corruption. Without accountability, we can tut and toot at an obese putrid military sector that gives the libertarian his coronary. Perhaps they just haven’t got round to controlling the naughty US government because they’re too busy chanting “de-fense” at inane sporting event? It’s not for me to judge as they fail to control the growl of the military industrial complex.

So far so negative! So let us for now continue in the misery stakes. Let’s sneer at textbook neoclassicalism whilst effectively, for the crack, also supporting its conclusions. That seems a waste of time, but there is a point. Honest! We start with the sneer. Textbook neoclassicalism is static in nature. Refer to time and the economics student will look up at you with gleaming gusto and refer to the variability of factors of production. But what if we move the analysis to a dynamic approach? In simple terms, the negative effects can be magnified. We have to refer to ‘crowding-out’ effects. There are opportunity costs generated by arms production. Resources needed to build the pretty tanks and dainty aircraft carriers could have been used in the private sector; a sector which can be assumed to be that more competitive, cunning and cute. Economic growth is likely to suffer as we destroy economic opportunities with our devil-may-care desire to gain military hardware.

So far no good: the military sector is likely to be a stuffed pig that drags our economy into the dumps of low potential. Nonetheless, if we move to other political economy schools our predictions can suddenly switchblade towards positive economic effects. Ironically, this theory is often dominated by the cheery lefties amongst us. However, let’s start with something more orthodox. It has been stated that the military sector can bear hug restrict economic growth. However, it is very easy to adapt that orthodox theory to predict the reverse result. One can simply include the notion of innovation within the ranks of market failure. The military sector is then a crucial means to inflate rubbish research rates and generate ‘spin-off’ technologies. The extra R&D generated by improving our military equipment can generate economic opportunities for the private sector. Indeed, if it wasn’t for the risk of ‘weapons of mass destruction’ attacks we wouldn’t have invented the stain-free tie. I’m grateful for the military for making it easier to eat spaghetti bolognaise.

But what about the comrades amongst us? What dinner party material do they have to refer too? There are essentially two camps predicting positive economic effects: the Keynesians and the Marxists. First, via the macroeconomist, we can refer to Military Keynesianism (such as Reaganomics). The military sector becomes vital for manipulating macroeconomic demand. The "true cost" of the military sector is then only appreciated by its relative inefficiency at demand management compared to other forms of public expenditure. And the keyboard warrior Marxists? The military sector provides a means to counteract the instability caused by monopoly capitalism. Military expenditure essentially is seen as a waste, but a waste that doesn’t threaten profit. Not surprisingly, the saucy socialists can refer to the 'permanent arms economy' and the macroeconomic protection of capitalist profits. And there does exist evidence in support of this premise (e.g. counter-cyclical use of military expenditure, plus the links between arms production and economic growth).

And my stance? I'm going to be wishy-washy about it and suggest we can link the different schools. We can start with the liberal understanding of the military-industrial complex. We can use that to understand how the conditions for military growth are generated. We can then refer to both Marxist crisis theory and post-Keynesianism to demonstrate how the nature of the economic system will then insist on maintaining that military waste. Profit must not be threatened. The military sector is then a natural part of capitalism. God bless it?