Militarism, Its History, and Its Impact on the Economy

How It Weakens U.S. Economic Power

Silhouettes of soldiers during Military Mission at dusk
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Militarism is a belief that a nation should develop, maintain, and use a strong military to expand its interests. A militaristic country has a large defense force on which it spends a large share of its income. Society subordinates other national interests to support a strong military.

In militarism, the government directs the factors of production to strengthen the military. The four factors of production are entrepreneurship, capital goods, natural resources, and labor. It, for example, may give preferential treatment to defense contractors. For example, President Donald Trump imposed tariffs on imports such as steel that he said could threaten national security—by increasing reliance on foreign producers for a strategic material giving them leverage over the United States in a period of heightened tensions.

The chart below shows the impact of war spending on U.S. GDP growth from 1921 through today, with adjustments for inflation.

Militarism, Nationalism, Mercantilism, and Imperialism

Militarism and nationalism go hand-in-hand. Nationalists believe their country is superior to all others. They don't support global organizations or collaborate with other countries on joint efforts. They use the military to defend their country. Nationalists find it easy to justify a large military to attack other countries because they believe them to be inferior. The military enforces the nation’s superiority both internally and externally.

Militarism grew under imperialism and mercantilism. It defended the nation’s imperial and trade interests. Between 1500 and 1800, Europe subscribed to mercantilism. It powered the evolution of nation-states out of the ashes of feudalism. Holland, France, Spain, and England competed on economic fronts by having large military forces.

The governments used military power to conquer colonies and defend the newly-acquired natural resources. They worked together to fund corporate, military, and national growth. In return, the military funneled the riches from foreign expansion back to their governments. It also enforced order in the colonized country.

Militarism also benefited from industrialization and capitalism. They strengthened the need for a self-governing nation to protect business rights. Capitalists supported governments that used the military to help them acquire foreign natural resources and beat foreign competitors. This could occur even in countries that weren't colonized. Just the threat of military power was enough to convince foreign governments to grant rights to multinational companies.

Militarism in World War I

Militarism was one of the main causes of World War I. The five major European economic powers—Germany, Austria-Hungary, France, Russia, and Great Britain—had relied on imperialism to build their wealth. They derived their economic power from lands they had conquered in the Middle East and Africa. They felt threatened when any of their rivals took over these colonies.

At the same time, nationalism was increasing among countries, like Poland, who wanted their independence. There was no United Nations or North Atlantic Treaty Organization to keep the peace. Instead, countries relied on bilateral agreements that often conflicted with other treaties. As a result, these powers felt their only protection was strong militaries.

Military spending grew in these countries from roughly $129.9 million in 1870 to $549.7 million in 1914. Germany worried about the other nations as it increased its spending by 73%. Germany believed that only a strong military could make it a world power. This triggered an armaments race among these powers.

German Militarism and World War II

The Great Depression hit Germany hard since it was already burdened with reparations from World War I. Germany's leaders printed so much currency to pay the debt that it created hyperinflation. That contributed to the rise of fascist leaders like Adolf Hitler. They used nationalism to override individual self-interest and subjugate the welfare of the general population to achieve social goals. German dreams of a Third Reich depended on expansion driven by militarism.

Militarism and the Cold War

After World War II, the Allied nations created the World Bank, the United Nations, and the World Trade Organization. They desired economic globalization as a defense against another devastating conflict.

But the Soviet Union and China promoted growth through communism. They needed to quickly raise the standard of living for their people to avoid more revolutions. With enough financial strength, they would increase their political power on the world stage.

The United States and Militarism

After World War II, U.S. companies increasingly found that the arms industry was profitable. The U.S. government subsidized the development of technologically superior armaments to stay ahead of Russia and China.

In 1950, President Harry Truman launched the three-year Korean War after North Korea invaded South Korea. It cost $30 billion or $341 billion in 2011 dollars. Compensation benefits for Korean War veterans and families still cost $2.8 billion a year. It also killed 36,574 American soldiers and wounded 103,284 more.

In 1961, President Dwight Eisenhower warned of the U.S. military-industrial complex in his farewell speech. He admitted that the Cold War made a strong military necessary, but he shared concerns that the industries that supplied arms could threaten the national interest. He said it could crowd out spending on other priorities, thus weakening the underpinnings of economic growth.

In 1965, his successors launched the Vietnam War. By 1975, it had cost $111 billion or $738 billion in 2011 dollars. Compensation benefits for veterans and families still cost more than $22 billion a year. That's added up to $270 billion since 1970. The war killed 58,220 American soldiers and wounded 153,303 more.

U.S. Militarism and Terrorism

National outrage against terrorism has triggered an enormous expansion in U.S. militarism. In 2001, President George W. Bush started the Afghanistan War in response to the 9/11 terrorist attacks by al-Qaida. It launched the War on Terror, and by 2017, it had cost the American people $1.07 trillion. In 2003, Bush started the Iraq War to end the regime of Saddam Hussein. It cost $800 billion and lasted longer than the Vietnam War. It killed 4,418 U.S. soldiers and wounded 31,994 more.

The U.S. military budget doubled between 2001 and 2019. A 2019 estimate pegged the total cost of post-9/11 wars at $6.4 trillion and 801,000 lives. As of February 2021, these costs are continuing to accrue as the wars in Iraq and Afghanistan continue.

President Donald Trump asked for $705.4 billion for the FY 2021 military budget. In the budget approved by Congress, the Department of Defense accounts for nearly 17% of federal spending. As a result, U.S. military spending is greater than those of the next 10 countries combined.

Impact on the Economy

Like any type of government spending, military spending stimulates the economy. Government spending is one of the four components of GDP. When it increases, so does economic growth. For example, spending on World War II helped to boost the economy after the Great Depression.

But military spending is not one of the best ways to create jobs. A University of Massachusetts at Amherst study found $1 billion in defense spending in 2005 created 8,555 jobs. But that same $1 billion spent on building roads, bridges, and other public works created 19,975 jobs. Spending the same amount on education created 17,687 jobs.

Since 2002 the United States has consistently run sizable budget deficits. The large amount of military spending has not been able to generate concomitant income, employment, and tax revenue sufficient to balance the budget.

The costs of a large military not only contribute to debt, but also deprives funding from other pillars of the economy like infrastructure, education, and expanding access to healthcare. That contributes to issues such as America's slipping global education ranking.

However, high levels of military spending are beneficial to U.S. companies that operate in this industry. For example, Lockheed Martin derived 60% of its revenue from Defense Department contracts in 2018. The U.S. economy also benefits from the exports of arms to its allies. In 2018, U.S. companies shipped 36% of the world's arm's exports, up from 30% in 2013.

The Bottom Line

Militarism encourages a nation to have a strong military to expand its interests. It goes hand-in-hand with nationalism and benefits from capitalism. Militarism contributed to World War I and World War II. Militarism after World War II continued during the Cold War. While some claim it hindered the peaceful efforts of the United Nations and other global organizations, the Reagan Star Wars Program (Strategic Defense Initiative) and the threat from a strong U.S. military are also credited by some informed observers with leading to changes that led to the collapse of the Soviet Union

The United States spends more on its military than the next 10 countries combined. Defense spending consumes roughly 17% of the total budget. That contributes to the debt and crowds out spending on needed infrastructure, education, and other competing pillars of a strong economy.