For the past century or so, existing technology and productive capacities in agriculture and industry could have been used to provide everything needed by all of the world’s people for, at least, their health and comfort. In that same century, instead, about 80 percent of the global population has gone without adequate food, shelter, medical care and education. Lives have been needlessly shortened, cramped and miserable. Countless millions have died of starvation. They, and all too many in the US, have suffered from what this richest and most powerful nation has – and has not – done both at home and abroad. There are many dimensions to that disgrace; the one that will be dealt with here, the political economy of military expenditures (“milex”), ranks high on that list.
What were once called military expenditures are now called defense expenditures by the US. That nicely spun terminology was joined at the hip with the Department of War (its title since 1789) as it was renamed the Department of Defense. All that, with much more on its way, was done in 1947, as the Cold War – itself born even during World War II – was “announced.” In 1948, Orwell, in his 1984, anticipated the worse to come, dubbing these methods “doublethink” and “doublespeak”.
The main device of the Cold War and its vast milex was fear, repeated in new clothing by Reagan in the 1980s, and put into uniform after 9/11. But the public’s acceptance of that rationale throughout the 1980s and still today has importantly been a product of its presumed economic benefits. As the Cold War took hold, few indeed were those in the US who had forgotten the horrors of the depression, nor were there many who failed to notice the twofold consequences of the war and what followed: lots of jobs, a high percentage of them “good jobs,” with, as time went on, social benefits earlier undreamed of by workers. That there were and are other and much better, safer, and promising ways for providing good jobs and social benefits – and a substantial record of their having been accomplished elsewhere – were notions shoved aside or under a carpet of silence and deceit. Of which, more later; first an examination of how milex rose to its continuing and, now, increasing importance.
As the myths of the Cold War grew, the expansion of the Department of Defense and its expenditures were cancerous. As Chalmers Johnson (once with the CIA, himself) put it:
‘The actual Defense Department is an alternative government, running not just the Army, Navy, Air Force and Marine Corps, but numerous intelligence agencies, 725 admitted military bases in other people’s countries (the actual number is considerably higher), a hoard of weapons of mass destruction that could wipe out life on this planet many times over, with plans to build battle-stations in outer space from which it can dominate the globe.’ 
The harmful socioeconomic consequences of our huge milex received considerable critical scrutiny as they took hold after 1947.  What such critiques demonstrate is: 1) the prodigious waste of both human and nonhuman resources by milex (e.g. the Pentagon using as much oil as all but seven nations); 2) their serious distortion of educational and occupational structures and negative effects on economic productivity, and (among other matters) 3) their low-yield contribution of jobs and incomes for ordinary people, when compared with the same levels of non-military government spending. To comprehend the socioeconomic importance of milex, two measures are central: 1) the percentage of milex to GDP, and 2) their percentage of total federal government expenditures.
First, the dollar amounts of both sets of figures are systematically understated because of what is and is not but should be included as military, and because of the ways in which the overall budget is structured. Thus, the average percentage of milex to GDP is regularly at about 4 percent; the reality, when what Cypher calls “add-ons” are included, takes us into double digits.
Consider first the interest on the national debt. John L. Boies has undertaken the most plausible and statistically thorough analysis of milex.  If, as he reasonably suggests, we assume that “the share of the US debt resulting from security expenditures is equivalent to the share of on-budget expenditures to national security” we find that “since 1948 national security and national security-related interest on the debt has absorbed some 57 percent of state resources.” Further details of such analyses will be discussed shortly; but first, how do we explain what must be seen as continuing, even worsening, social irrationality in the face of always high and now rising milex?
The explanation is not to be found in any tangible military threats from abroad, whether in the years following World War II or now, but in the economic and sociopolitical developments that rationalized milex; they will occupy the discussion that follows.
At the center of those developments were the interactions of military Keynesianism, the Cold War and McCarthyism which – their paths greased by consumerism and the media – have qualitatively altered the consciousness and the social standards of the people of the USA: We the People of the USA have “learned” to acquiesce, to look the other way, to be numbed to the violation of our historic ideals; or, when we do note ugly realities, to shrug them off, with “If we’re doing it, it must be OK,” or, “So What?”
Now to some of the key whys and wherefores of the “military-industrial complex” as it was called by, of all people, General/President Eisenhower. It is an intricate “complex” in its origins, structures, functioning, and effects. The following brief analysis seeks to reduce that complexity into several parts: 1) The iron triangle of milex; 2) Military Keynesianism; 3) The socioeconomic costs of milex: who benefits and who pays in the USA/who benefits and who is harmed abroad? 4) Are their practical and desirable alternatives for our people and our nation?
1. The Iron Triangle of Milex
The “triangle” metaphor was developed by James Cypher, who is generally seen as the most astute economist critical of milex.  In much of what follows, he is either being quoted directly or paraphrased. Two of the “triangle’s” sides are governmental: civilian and military; at its “base” are the 85-90,000 private firms that profit from the military contracting system; that in turn gives them considerable direct and indirect political influence – added to by their sway over millions of “defense” workers – to push for ever-higher military budgets. We start with that economic base.
a) In addition to being a meaningful political bloc in and of themselves in the election booths, the weight of those companies is felt at least as effectively in the offices of our elected representatives and the White House, made so through the unremitting pressure of thousands of lobbyists and related campaign finance.
b) Then, it is easy to see why businesses and workers have become so addicted to milex, given the depression of the 1930s: from a nation which in 1933 had 25 percent unemployed and in 1940 still had 10 percent unemployment, war brought us to our lowest unemployment rate ever – a bit over one percent in 1943; and the 1950s and 1960s became the best years ever. But 85-90 thousand firms? Yes, but the lion’s share of military contracts are delivered to a tiny and always shrinking fraction: During World War II, only 100 giant companies received two-thirds of the dollar value of milex contracts; in the past few years the top 25 companies got more than 50 percent, the top 10 got 40 percent; as mergers continue, they will get more.
The two governmental sides are a) the civilian governmental agencies that shape US military policy: the President’s office, the National Security Council, the Senate and House Armed Service Committees, the CIA and the NSA; b) the military institutions that include the Joint Chiefs of Staff, the top brass of the Air Force, Army, Marines, and Navy, the powerful “proconsul” regional commands (CINCs), and, in an important supporting role, veterans’ organizations.
It doesn’t take much imagination to see how those three “sides” taken together would constitute a mighty pressure group; adding the pressures and inducements of lobbyists reveals “the iron triangle” as the most focused pressure on our government.
In the past 50 years, it has been rare for there to be congressional opposition to the “triangle’s” wishes – except for infighting over particular and competing milex projects: a new weapon vs. an older one; one new weapon vs. another similar new weapon; a “Star Wars” set of weapons vs. an older set of weaponry, etc. When that happens, it is often one state against another: California vs. Texas, Mississippi vs. Massachusetts, etc. But then the debate is not over the size of milex, but who gets how much.
In terms of who is winning that catfight, it is important for workers who support milex to understand that the battle is steadily being won by the giant companies who are producing always more expensive, always more complicated, always more militarily irrelevant hi-tech weaponry, producing fewer high wage jobs as, at the same time, military bases and their economic meaning for small towns are being shut down.
2. Military Keynesianism
John Maynard Keynes (1883-1946) was the leading economist in the English-speaking world in the 1920s, and its chief advocate of “monetarism.” That doctrine was placed into scornful disuse by Keynes himself, in his General Theory of Employment, Interest and Money (1936). Keynes argued that the 1930s depression (which had begun in his native England in the 1920s) was there to stay, no matter what was done in the way of traditional monetary policy (i.e., the manipulation of interest rates and the supply of money). The problem, he argued, was the inability for private demand – consumption + investment – to purchase a healthy economy’s production at reasonable prices; thus it was essential for the government to provide the needed demand, to be financed through deficit spending. On what?
On the governmental financing of “social consumption” and “social investment.” The former would take various forms – governmentally subsidized housing, education, culture (which in the USA was done through WPA projects for music, literature, art, and the like); the latter, “social investment” included what we now call “infra-structure”: bridges, highways, dams, etc. (accomplished in the USA through the PWA).
The items in both categories had in common that they were publicly financed, as well as humanly and socio-economically useful. Keynes, although not foreseeing either the qualitative or quantitative dimensions of post-World War II milex (he died in 1946), was nevertheless scornful of its historical predecessors: Ancient Egypt and its pyramids, or “building battleships, sinking them,” and then building some more, equivalent to “hiring some thousands to dig holes and others to fill them” – all job-creating, all useless and wasteful.
Which brings us to contemporary milex, with the additional comment that although Keynes was critical of capitalism, seeing it as a system “merely of possessors and pursuers”, he also thought it the least bad of all possible systems. Even so, from the 1970s on, and despite that his aim to save capitalism from itself was intrinsically conservative, his arguments and policy proposals came to be called “left-wing Keynesianism.”
After World War II, Keynesianism in its intended form was more or less adopted throughout the industrial capitalist societies; “more” in Western Europe, “less” in the USA. What kept our economy buoyant after the war was a mixture of what Keynes intended plus much more of what he scorned: military Keynesianism.” (Joan Robinson, who helped him write the General Theory, called it “Bastard Keynesianism”. 
Unquestionably milex and related expenditures and the Cold War provided a firm base for US economic buoyancy from 1946 to 2000; it is clear also that the recessions of those decades, including that which began in 2001, were much shortened by ongoing and always rising milex. Recessions cannot be avoided under capitalism, but their fall into depression can be barred by the steel gates of milex “+” (with the “+” to be discussed soon) – whether or not accompanied by “hot war” as in Korea, Vietnam, or the Middle East.
How so? Two matters are of key importance: firstly, the actual as contrasted with the official statements of the annual amounts of milex, and secondly, the indirect economic effects of any given milex.
For the fiscal year 2003 (which began in October 2002), the basic Pentagon budget (including “Homeland Security”) reached $433.7 billion – coming close to the post-World War II high of $449 billion (adjusted for inflation) spent in 1968 at the height of the Vietnam War… But this calculation ignores important “add-ons,” such as foreign military sales, military space programs, veterans’ benefits, military retirement, foreign military aid, and interest on the national debt attributable to past deficits related to military spending.  Since Iraq, those numbers have risen greatly, of course.
Here is a closer look at some of those “add-ons”:
a) Interest on the national debt: At least half of our yearly interest payments on the national debt are milex-connected (the total runs at $200+ billion every year).
b) The share of the Department of Energy’s expenditures on milex, not least those on nuclear development, where it is estimated at least $4 billion annually for nukes is “squirreled away” in its budget. 
c) The “Social Security matter”: The federal budget for 2002 lists $460 billion as “Social Security expenditures”.  However, until 1966, Social Security payroll deductions and benefits were “off budget”. In that year, as the Vietnam war expanded, LBJ, in addition to understating milex by $10 billion (roughly $100 billion today) from the Budget Office, decreed that payroll deductions and benefits be classified as taxes and expenditures and thus be “on budget”. Why?
Because adding a large amount of non-milex to federal expenditures automatically reduces the percentage of milex to the total: good political sense, especially with an unpopular war going on. Note that Social Security benefits are not and should not be considered as “expenditures”: over time, they are fully self-financed by the beneficiaries. Indeed, as Social Security payroll deductions have always far outrun benefits, the Treasury has borrowed hundreds of billions from the surplus every year, thus reducing its need to issue bonds and camouflaging the debt.
However, if and when the Social Security surplus (the “lockbox”) is emptied, it will be necessary for bonds to be issued to pay benefits; in turn, that will increase general income taxation. Thus, to the public’s present payroll deductions one will have to add the taxes to be paid for this skullduggery – not by the rich, but by the bottom 80 percent of us.
d) Milex are also hidden away in the expenditures on foreign aid, the CIA, space research, and “schools” (one of which, “the School of the Americas” has turned out at least 60,000 graduates ); we can only guess at the total – except we know that the CIA budget is well over $40 billion annually, and that (for example) it also receives “$5.6 billion for keeping secret documents secret”. The circus has come to town; and we’re the clowns.
Conservatively adding all that up, we can easily agree with Cypher when he says the add-ons “would increase the real level of military spending by more than two-thirds in a given year.”  That is, the real figure for fiscal 2003 would have been something between $700 and $900 billion. Further, consider interest on the debt: it is of course paid to those who hold the debt (in the form of US bonds, etc.). In the US they are mostly financial institutions (that is, their owners) and the top 10 percent of the population. Apart from all else, the mere accumulation of debt from milex makes for always greater inequality in a system of existing great inequality.
Nothing has yet been said of the terrible socio-economic waste of milex. Even if we were to grant that we need to be as “prepared” as we have been told, that still would not justify the exorbitant profits and wastefulness of milex. For example:
‘In hearings before the House Committee on Armed Services in 1984 – and in addition to showing that $750 was paid per toilet seat – the prices of ordinary tools at retail level were compared with defense contractors’ prices, for 21 items. At your neighborhood hardware store, screwdrivers, wrenches and the like all sold for less than $13, and many under $5. The defense contractors sold none for less than $225 (a screwdriver, retailing for under $3), and their highest price was $1,150 (a wrench, retail price $4.88). The total retail price for the 21 items was $92.44; but from the contractors, $10,168.00.’ 
Screwdrivers, toilet seats, wrenches – peanuts. For the giant profits, take a look at the giant companies and their giant contracts – for planes, subs, missiles. They are the most expensive and most wasteful hard core of milex.
Of the tens of thousands of separate firms now contracting with the Pentagon, as noted above only a few companies take the lion’s share of all contracts, and farm them out to the multitude of other companies; they hire about 3 million workers, and there are about a million civilian workers on the Pentagon payroll, plus a million paid reservists. What are we getting for our $450+ billion of direct and at least twice that of indirect taxes? A lot of waste, more protection than we need, lots of jobs that could be used for better purposes, lots of profits which, by any reasonable definition are undeserved. 
Item: Profit rates for milex companies are two to three times those for all other companies (except pharmaceuticals!). And why not, given “cost-plus contracts” and virtually assured payments for cost overruns?
Item: The fabled B-2, or “Stealth” bomber. Set aside that it has never been used in combat (The F-117A “Stealth” fighter was used, and flopped, in Panama and in the first Gulf War). The first 1980s contract for ten B-2s set the price at $400 million each, or $4 billion; by 1990 that had risen to $870 million each; thence, in 1994 to $2.2 billion, each: $22 billion in toto, more than five times the original price.
Sounds awful? Try this: Standard Pentagon contracts allow – and pay for – correction of defects. The first B-2 had 110,000 defects; the second had 80,000. Given that it’s cost plus with defects plus-ed, that would seem to give an incentive to the companies to make defects, no? Not to worry; in 1996 Congress appropriated $44 billion, enough for 20 B-2s. 
And it doesn’t stop with planes. In an editorial entitled “Jackpot,” the NYT reported that “the Senate Armed Services Committee tossed $1.3 billion into its budget bill to order an LHD-7 amphibious assault ship the Navy did not want…” but that Senator Trent Lott (Rep. Miss.) did, for it was to be constructed in his state. 
Lest we forget, one of Reagan’s favorites was “Star Wars.” It was shelved after his departure from the White House, only to be revived by Newt Gingrich and Bob Dole (House and Senate leaders, respectively) in 1996. The Congressional Research Service estimated it would cost $60-70 billion. Gingrich, in support of his “Defend America Act of 1996,” argued that “One day, mathematically, something bad can happen and you ought to have a minimum screen on a continent wide basis, and its doable” – as “doable,” the American Physical Society pointed out “as deflecting a bullet in mid-flight by firing one of your own.”  And, of course, as with so much of the Reagan Follies, the Bush team has brought Star Wars back.
In addition to the foregoing direct costs and effects of milex are many that are indirect. It is generally agreed that for every governmental dollar spent on milex, GDP will increase by three dollars. Why? Because those milex dollars go to workers and owners; they in turn spend most of what they receive; and those expenditures in turn generate more incomes, and more expenditures, and… It is what is called “the multiplier effect.” And it works the same way for all governmental expenditures.
In the years 1990-2002, official milex came to over $4 trillion; that plus two-thirds of uncounted milex, times the multiplier effect which triples it, helps considerably to explain the “fabulous 90s” – quite apart from taking into account just how important milex have been for the main constituents of the “new economy”: subsidized research, guaranteed markets, not least. Lots of economic wallop there, and just as much political wallop, if one considers the “multiplier effect” of economics on politics. 
3) The Socioeconomic Costs of Milex: Who Benefits and Who Pays in the USA?
The answers are both very simple and very complex. Those who benefit economically are the owners and executives of the milex companies and, as well, their workers. However: Although in principle there is no essential reason that the “health” of the milex companies and their workers must have adverse socioeconomic effects, in reality there have been and remain serious negative consequences: they can be and have been used to forestall or cutback needed social spending.
From the late 1970s on, and increasingly from the 1980s until today, high milex – almost always supported by business and labor – has regularly been used as an excuse to “crowd out social programs supported by public-sector funds, such as healthcare, public transportation, education, and environmental protection.”  That became an odious, ideological and dishonest excuse in the Reagan years, as it is still. 
That’s at home, of which more in a minute. What about abroad? As might be expected, the benefits from US milex and its cold war accompaniments went mostly to those at the higher levels of income, wealth and power within those countries was affected by our policies (which is to say, much of the world), and that most of the harm done – both qualitatively and quantitatively substantial – fell upon those at the bottom and middle levels of income, wealth and power. And the major reason is that US foreign policy – in the name of freedom and democracy – has effectively reduced rather than increased democracy in the world. The Cold War militarized global policies; in doing so, it served to maintain long-standing conservative/dictatorial governments, and/or to aid in the installation of fascist or quasi-fascist governments in all quarters of the globe.
4) Are there Practical and Desirable Alternatives to Milex?
You bet there are, not least for those who have been supporting milex for economic reasons, with or without reservations concerning our aggressive foreign policies. The basis for that “bet” is by no means speculative; all we have to do is take a quick look back at how our socioeconomic policies changed after 1935, and their several valuable consequences.
Some who read this may be old enough to remember and/or to have read about what came to be called “the Second New Deal”; for most, however, that history remains unknown, cancelled, or distorted. So a brief review, beginning with why “second”?
Because the “first” New Deal was a bummer, a simple continuation (or worsening) of what had been done by the Hoover administration. When FDR was elected in 1932, he was what today what we call a conservative, a centrist. His two major policies were to shut the banks down (to prevent a run on them in 1933) and to bring into being the NRA (National Recovery Administration). Its program had been laid out in the late 1920s by the head of GE, Gerard Swope; it required that about 800 separate industries would use (or form) their trade associations to set minimum prices, establish regional sales quotas and, among other niceties, that anyone going against those rules would be prosecuted in federal courts. To give you an idea of its nature, In 1935 Hitler sent a delegation of economists to consider its use in his land of the free and brave. It was declared unconstitutional in 1936. 
Meanwhile, also from 1933 on, unrest was spreading over the land, from sea to shining sea: strikes on the Pacific Coast docks, in Midwestern auto, steel, and electrical plants, left and right political movements – Huey Long’s “Share the Wealth” in Louisiana, Father Coughlin’s fascists in Detroit, Upton Sinclair’s End Poverty in California, most famously. And the 1934 election shoved a good part of Congress leftward (if not very much so), including FDR’s advisors (most importantly Harry Hopkins – a liberal version of Karl Rove – and his wife Eleanor).
Thus it was that, in 1935, the Second New Deal began: first with the Social Security Act then with the Wagner Act, giving unions the right to strike (up to then, forbidden); then, setting maximum hours and minimum wages and forbidding child labor; then, subsidizing housing for low-come households and lots more: the WPA (at least 6,000 writers, some of whom became famous, were paid to write; and actors to act, and musicians to play, and… son on); or the PWA, which financed the building of dams, roads, schools, hospitals…; and the CCC, which set young people to work in agriculture and forestry…; all that and more, including the Tennessee Valley Authority, all of them providing jobs, needed infrastructure, services and, not least, morale, in an era of demoralization. The Second New Deal helped to reconstruct the power structure and the structure of the economy, underpinned by what became strong unions (and a liberalized Democratic Party).
Substantial improvements were made, leaving much more undone. Some of that was accomplished during and after the war, most notably perhaps with LBJ’s over-named War on Poverty, with Medicare, and a basket of other items. But just as FDR was diverted by World War II, so too was LBJ by Vietnam. And, with the support of organized labor – whose very successes had softened them up – he chose a track that allowed a Nixon to get elected. And it’s been down in the political sewers ever since, Carter’s and Clinton’s regimes not exempted. In one way or another, both parties have shifted to the Right since the 1960s; and now it is not just a shift, but a downward lurch. And milex once more rises.
This time rising milex doesn’t carry anything at all that is positive for the working class – for most it means going from good jobs and benefits to lousy jobs and no benefits; and even that small percentage that is highly skilled will find their jobs shrinking. We need a healthy economy; milex is a deadly and, up to now, an addictive drug.
So, it is time for those who have supported “milex” for economic reasons to see that they have been taken for a ride – not only, but most importantly because to support economic militarism is to give support to big business and right wing policies for all dimensions of our existence.
Time to get angry, once more; time to become seriously political, to organize, to recognize the commonality of interests of the non-rich, here and everywhere.
If not now, when? It not us, who?
1. C. Johnson, ‘Who’s In Charge?’, London Review of Books, 2/6/03.
2. J. Cypher, ‘Military Spending, Technical Change, and Economic Growth’, Journal of Economic Issues, March 1987; J. Cypher, ‘The War Dividend’, Dollars & Sense, May 1991; S. Melman, The Permanent War Economy (New York: McGraw Hill, 1974); J. Boies, Buying for Armageddon: Business, Society and Military Spending Since the Cuban Missile Crisis (New Brunswick: Rutgers University Press, 1994).
3. Boies, Buying For Armageddon.
4. Cypher, ‘Military Spending’; J. Cypher, ‘Financial Domination in the US Economy’, in S. Fayhasmanesh and M. Tool, eds., Institutionalist Theory and Practice (Cheltenham: Edward Elgar, 1998); J. Cypher, ‘Return of the Iron Triangle’, Dollars & Sense, Jan/Feb 2002; J. Cypher, ‘A Prop, Not A Burden: The US Economy Relies on Militarism’, Dollars & Sense, July/August 2002.
5. L. Turgeon, Bastard Keynesianism: The Evolution of Economic Thinking and Policymaking since World War II (Westport: Greenwood Press, 1996).
6. Cypher, ‘A Prop’, 7/8.
7. Cypher, ‘War Dividend’.
8. Economic Report of the President (Washington DC: US Govt. Printing Office, 2002).
9. The New York Times, 10-1-96.
10. Cypher, ‘War Dividend’.
11. W. Adams & J. Brock, The Bigness Complex: Industry, Labor, and Government in the American Economy (New York: Pantheon, 1986).
12. M. Zepezauer & A. Naiman, Take the Rich Off Welfare (Tuscon: Odonian Press, 1996).
13. The New York Times, 7-14-96.
14. ‘Jackpot’, The New York Times, 7-19-95.
15. The Nation, 6-24, 6-25, 7-8, 1996.
16. Economic Report of the President.
17. Cypher, ‘A Prop’, 7/8; S. Melman, Our Depleted Society (New York: Holt Rinehart & Winston: 1965); S. Melman, Pentagon Capitalism (New York: McGraw Hill, 1970).
18. D. Stockman, The Triumph of Politics (New York: Harper, 1987).
19. B. Mitchell, Depression Decade (New York: Rinehart, 1947).
Doug Dowd was born in San Francisco (1919). He began to teach at Berkeley in 1950; and then at Cornell until 1971. He returned to San Francisco for university teaching until 1992, while, at the same time, teaching "free community classes" (which continue). For about 15 years, he has taught every other semester in Italy (presently at the University of Modena). Among his books, most recent are Blues for America: A Critique, a Lament and some Stories, Capitalism and its Economics: A Critical History and The Broken Promises of America at Home and Abroad, Past and Present: an Encyclopaedia for our Times.