Militarism, Its History, and Its Impact on the Economy

How It Weakens U.S. Economic Power

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 disproportionate share of its income. The society subordinates all other national interests to support a strong military.

In militarism, the government directs the factors of production to strengthen the military. The four factors are entrepreneurship, capital goods, natural resources, and labor. It gives preferential treatment to defense contractors. For example, President Donald Trump imposed tariffs on imports, such as steel, that he said could threaten national security.

The chart below shows the impact of war spending on U.S. GDP growth from 1922 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 join 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 94 million pounds in 1870 to 398 million pounds in 1914. Germany worried about the other nations as it increased its spending by 73%. Germany believed that only war 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 many marks to pay the debt that it created hyperinflation. That allowed 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 found that war was profitable. The U.S. government-subsidized 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 today's 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 today's dollars. Compensation benefits for veterans and families still cost $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. Another 1,643 were missing in action.

U.S. Militarism and Terrorism

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 cost $1.07 trillion and launched the War on Terror. 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.

By 2020, the ongoing war on terror will cost $6.4 trillion. This figure includes the added spending for the Department of Defense, the overseas contingency funds, and the increase to the budget for the Veterans Administration.

The U.S. military budget has almost doubled between 2001 and 2019. That’s when spending on the four components of defense spending are taken into account. The first two are the base budget for the Department of Defense and the budget for overseas contingency operations. But you must also include the other agencies that protect our nation. Their budgets are sometimes hidden within other agencies. They include the Department of Veterans Affairs, Homeland Security, the State Department, the National Nuclear Security Administration in the Department of Energy, and the FBI and Cybersecurity in the Department of Justice. These departments also have OCO funds.

President Donald Trump has asked for $750 billion for the FY 2020 military budget, a new record. That’s 16% of the $4.7 trillion in federal spending. It's almost as much as the $1.1 trillion budget for Social Security. It's more than Medicare at $679 billion or Medicaid at $418 billion.

Military spending is greater than all other discretionary departments combined. These include Health and Human Services, the U.S. Treasury, Education, and NASA. Combined, they total $185.7 billion. It's difficult to reduce the $2.7 trillion budget deficit and the $26 trillion debt without cutting defense spending.

As a result, U.S. military spending is greater than those of the next 10 countries combined. It's four times more than China's military budget of $228 billion. It's almost 10 times bigger than Russia's budget of just $66.3 billion.

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 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.

For example, the $2.4 trillion spent on the War on Terror created 20 million jobs and added $1.4 trillion to the economy. But if it had gone toward education instead, it would have created almost 42 million jobs and added $3.1 trillion to the economy. That would have helped end the 2008 recession sooner.

A review of U.S. gross domestic product by year shows that increased military spending has not had the desired effect on the economy. Instead, it's simply increased the debt by year without the needed boost to GDP. As a result, the debt-to-GDP ratio exceeds 100%.

But the costs of a large military are creating unsustainable debt. It also deprives funding from other pillars of the economy like infrastructure, education, and fighting climate change. U.S. education ranking is behind that of other countries. As a result, companies can find equally qualified labor in other countries for a lower price. That’s contributed to jobs outsourcing. It’s also led to a large U.S. trade deficit as domestic companies build factories overseas and “import” the finished goods back to America. Reluctance to fund a universal health care system means Americans pay more than other developed countries but get less bang for their buck. The U.S. infrastructure system is deficient and holds back economic growth.

It’s also given preferential treatment to a few contractors. The U.S. companies that benefit the most from this relationship are Lockheed Martin, Boeing, Raytheon, Northrop Grumman, and General Dynamics. Lockheed Martin derives 60% of its revenue from Defense Department contracts.

There are many tax write-offs that greatly help defense contractors. These include accelerated depreciation, deferred taxes, and research tax credits. As a result, some contractors paid no taxes. These include General Electric, Honeywell, Raytheon, and Boeing.

The U.S. government oversees the exports of arms to its allies. In 2018, U.S. companies shipped 36% of the world's arm's exports. This has increased from 30% since 2013 due to increased shipments of F-35 fighter jets. The U.S. government has spent $1.5 trillion since the 1990s for the development of the aircraft. The Congressional Budget Office had recommended updating the F/A-18 and the F-16 planes instead.

Militarism also contributes to poverty in developing nations. It diverts resources. Money for high-technology equipment cannot be used for infrastructure, health care, education, or other economic needs. Militarism suppresses dissent, creates environmental damage, institutes classism, and leads to crime and terrorism.

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. During the Cold War, it overcame the peaceful efforts of the United Nations and other global organizations.

The United States spends more on its military than the next 10 countries combined. Defense spending consumes 16% of the total budget. That contributes to the debt and crowds out spending on needed infrastructure, education, and other pillars of a strong economy.

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