Insurance We Pay Ourselves!
In an entry considering kinds of government expenditures that can be thought of as “insurance,” Tyler Cowen gets most of the reasons Americans allow or support high defense spending:
Our government does persuade its voters to support a large defense budget, but this is done in part by a) periodic conflict and invasions, and b) people holding deeply irrational views of America’s proper place in the world (e.g., “my country, right or wrong”).
Surely “c” is, the defense budget turns into jobs and shares in military contractors. The government is careful to spread the loot geographically, maximizing congressional buy-in. Mrs. Offering, in a position to know, tells me that in the mid-1990s there were 43 states supplying parts for the aircraft-carrier program alone.
The defense budget is a wealth transfer to investors, managers and employees of military contractors. Since so much of the country is in on the take, at least geographically, you might wonder how that works – it recalls the miracle of the loaves and fishes. That’s where deficit spending comes in. Today’s taxpayers take a hit, and tomorrow’s do too.
The other thing that makes defense spending more salable to taxpayers as insurance than, say, spending on climate-change prevention, is hiding inside Cowen’s “a.” The salespeople – appropriators; Presidents; contractors – don’t have to wait around for “periodic conflict and invasions,” and indeed they don’t. They can go out and start them. And indeed they do.
The trickiest long-term issue I see as a dove is how the US could successfully manage the transition to a peacetime economy. A good deal of the defense industry constitutes manufacturing sheltered from foreign competition – by “national security” concerns rather than tariffs. What can all those people make instead of JDAMs and warplanes that the world market will buy?
Comment by Rafe —
January 6, 2008 @ 10:52 am
In Robert Reich’s book, “Locked in the Cabinet,” he describes defense spending as America’s substitute for industrial policy. I had never really thought of the economics of it in that way before then.
Comment by the talking dog —
January 6, 2008 @ 11:02 am
Jim, the problem is beyond awesomeness: we pay around $600 Billion per year (most of which is not going to Iraq or Afghanistan, btw), and the rest of the world combined pays around $500 Billion, including places we prop up like Israel, Egypt, Jordan, etc. You have nailed it in one– that we buy off huge swathes of our own economy dependent on keeping the game going. (We also do this with health insurance companies, of course, but I digress…) BTW… Harry Truman started with… this national security state mania has always been “bipartisan”.
I think the best way to look at a solution to this unsustainable problem is backwards, i.e., how we pay for it. Most Americans, by and large, favor regressive taxes over fair or progressive taxes. Hence, the most popular tax we have BY FAR is the social security tax that kicks in after a few hundred dollars of income and literally kicks out around 100K. We might like it because it funds our popular old age and disability pension… but I think we like it because it is simple… and unfair.
Well, enter “The Patriot Tax”, or “The Strong America Tax”. A flat, regressive tax on every gallon of gasoline or fuel oil, every cubic foot of natural gas and every ton of coal, which will now fund the Department of Strong America, which will independently collect the tax as well from energy suppliers. As our defense/homeland security expenditures are well over 20% of the total government spending, we can make this extraordinarily popular by immediately cutting regular income taxes 20% across the board while funding the Strong America Department at the pump.
Obviously, the poor and middle class will be adversely effected– as they will pay more for energy, while the more affluent will probably net benefit in terms of the income tax savings. See above re: the kind of taxes that ARE POPULAR. Hence: win win.
And we can add a third win, because market incentives for non-taxed energy sources (wind, solar, conservation, nuclear) will be automatic, without any further subsidies, and as demand for dirty fuels go down, either the tax will have to go up, or we will automatically have to cut defense spending… or get this… AFFIRMATIVELY INCREASE THE UNPOPULAR TAXES ON THE RICH to pay for them. Which we would never do… so just as the need to stick our noses in the Middle East to protect “our oil” goes down as we use less of the stuff, so does our desire to do so, because the Strong America Department’s revenue is going down (and we just won’t want to “soak the rich” to make up the difference).
The key selling phrase would be “Energy for a Strong America”. If the last seven years have taught us anything, it’s that what’s good for ExxonMobil, has GOT to be good for America.
Comment by Dave W. —
January 6, 2008 @ 11:03 am
I think Guy Montag can retire and live by selling off his assets.
I think Kwais would make an excellent bouncer at a bar.
It would be nice to see a well-designed automobile, designed in the US. Or a commercial OS besides WINDOWS and Apple’s. Or some more newspaper publishers. Or some more nurse practioner clinics. Or even a few more soft drink makers with different kinds of soft drinks.
Comment by Nell —
January 6, 2008 @ 11:10 am
Seems that wider understanding of this structural reality — the permanent war economy — is one of the educational effects of the government’s periodic conflicts and invasions. My own education on the subject happened in the late Viet Nam war years.
The era of reaction that set in almost immediately, combined with the design for Congressional buy-in, has made this an unsayable truth in mainstream politics. That, and the difficulty of the conversion problem even if the political will were to materialize.
What can all those people make instead of JDAMs and warplanes that the world market will buy?
Ummm…climate-change prevention technologies?
Of course, we missed what might have been the country’s last chance to do that almost thirty years ago, when Americans, unable to handle the truth, went for ‘morning in America’ mythology and became even closer to our good friends, the Saudi royal family.
Comment by diana —
January 6, 2008 @ 12:38 pm
“Surely “c†is, the defense budget turns into jobs and shares in military contractors.”
Absolutely. The DoD is the country’s biggest employer, so I’ve heard.
And the key word here is “contractor” — tell me, how many projects in how many universities (and elsewhere) are directly or indirectly funded by the DoD? I know of one offhand (don’t ask, it’s a military secret!) that is….where there is one, there must be 10,000.
Moving to a peacetime economy? Tell me, in whose world?
Comment by weldon berger —
January 6, 2008 @ 12:40 pm
“What can all those people make instead of JDAMs and warplanes that the world market will buy?”
Doesn’t much matter, really, since most of the weapons we sell are purchased for reasons other than the need for weapons. If we switch from fighters to bullet trains, well then, the Saudis will discover a burning need for bullet trains. We’ll still be giving Egypt and Israel a bunch of money with which they have to buy US goods, so we can let them decide what they want and put Lockheed to work building it.
Comment by Thoreau —
January 6, 2008 @ 12:55 pm
Diana-
The DoD does indeed fund a lot of unclassified research at universities. (No, I’m not in on it, and no, I don’t see my work as being of interest to them in the foreseeable future.)
I don’t have a good answer for how we transition away from a militarized economy, but one thing to keep in mind is that AFAIK a lot of defense spending is not necessarily at dedicated military manufacturers. They’ll buy fairly mundane supplies (nuts, bolts, food, clothes, tires, and the list goes on) from companies who also sell to the civilian market. Bombs might not be a civilian item, but tents are.
This fact has positive and negative aspects: By buying from so many suppliers, they give so many people a stake in the welfare-warfare machine. Politically, this makes it tough to end it.
OTOH, if we do end it, the impact won’t be as big as we think in some sectors. Even Boeing sells stuff to civilians, and not just commercial aircraft (think satellite TV, a branch that a friend of mine works in). (Not to pretend that Boeing would find a more rational policy painless, just to point out that even in the big leagues of defense contracting there’s room for a transition to civilian markets.)
Besides, even if we went from a $600 billion
defenseoffense budget to something more sane we’d still have a military (albeit a smaller one) and they’d still buy stuff.Comment by Neel Krishnaswami —
January 6, 2008 @ 2:07 pm
Nell, venture capitalists are already busily funding climate-change prevention technologies — the jargon phrase is “cleantech”. I suspect our friends in the military-industrial complex will find it a tad difficult to compete with people who are accustomed to not working cost-plus.
But since I’m a heartless libertarian, I think this is what bankruptcy laws were invented for. Or, in terms you might find more palatable, I’d argue that the “peace dividend” is real, and the conversion problem is really just the broken window fallacy in disguise.
But more to the point, I don’t think “permanent war economy” is an accurate description of the US. As a share of GDP, the US hit its post-WW2 low in 2000, at 3% of GDP, and is now maybe twice that — it’s a bit below Reagan buildup levels. That’s a truly gigantic pile of money, yes, but it’s not a permanent war economy, because the US economy is just so stupidly huge that even a gigantic pile of money is not very big in relative terms.
I think we currently have high defense spending for a very simple reason: the US is engaging in (present tense) lots of pointless foreign wars. The reason our government engages in these foreign wars is not because we are less virtuous than China, Russia, France or the UK, either. It does so because it has the capability, and those nations do not.
And that capability comes from the fact that we’ve got hundreds of military bases all over the world, which greatly lowers the diplomatic cost of foreign invasions. If we didn’t have those bases, every time we wanted to pick a fight with another country, we’d have to negotiate agreements with all the countries that would serve as transshipment points for US soldiers, tanks, fuel, ammunition and similar. Such negotiations serve as an external constraint on the freedom of action of our government, and serve to make starting wars harder, which is why our government has worked so hard to eliminate them with long-term basing agreements.
Comment by Leonard —
January 6, 2008 @ 2:46 pm
Me too. The thing about a question like “well what can people do beside make bombs” is that we do not and cannot know the answer in any detail. Rather the answer is something that can only be determined by a process of discovery. That’s what the free market will do when the time comes. Bankruptcy is a part of that process. But you have to actually make the cuts, and let the free market work, to see what happens.
We can, of course, have a general economic understanding of “what people can do”. The answer to that is: “what they have a relative advantage in”, whatever that may be.
Comment by Dave W. —
January 6, 2008 @ 2:48 pm
The reason our government engages in these foreign wars is not because we are less virtuous than China, Russia, France or the UK, either. It does so because it has the capability, and those nations do not.
This is an interesting bit of logic. I disagree. First, I don’t think that having the capability leads in eluctably to engaging in unjust wars. Second, if having the capability does leads us ineluctably into unjust wars, then we have a duty to destroy the capability (eg, execute Erik Prince for war crimes on teevee, seel Blackwater assets at a fire sale and give proceeds to state-funded medical insurance schemes set up for minor children). If you need more ideas on how to rid ourselves of this woeful capability, I’ve got plenty more.
Comment by Tony P. —
January 6, 2008 @ 3:10 pm
Jim’s essay makes me think of Pharaohs and pyramids. You’ve got this nation, see, that engages a goodly fraction of its population in piling rocks on top of rocks in the desert. It seems like a pointless exercise, but it employs a lot of people directly and a lot more people indirectly. After a certain point, the ancient Egyptians might have actually voted for a bigger pyramid budget, if they could vote. Not because of the purported benefits of pyramids, not even out of a nationalist pride in having more and better pyramids than the rest of the world combined, but simply as a jobs program.
Of course, the engineers, masons, and coolies could have been employed just as fully to build roads, canals, and houses. They would still have needed (and been able to buy) the same quantity of beans, bread, and loincloths from the farmers, bakers, and weavers. In other words, “the economy” could have been just as robust if anybody had come up with the bright idea to build useful stuff, instead of pyramids.
To the extent that building sophisticated missiles and burying them in holes in the ground is about as useful as building pyramids in the desert, then to that extent modern Americans are not much brighter than ancient Egyptians.
And what are Dick and Dubya, if not the Grand Vizier and his Boy Pharaoh?
– TP
Comment by Leonard —
January 6, 2008 @ 3:35 pm
Actually pyramids or digging/filling holes would be better, since these pursuits don’t kill people (which is bad in itself), as well as bringing on the hate that endangers us, if slightly.
Comment by sine —
January 6, 2008 @ 4:00 pm
Jim, you are right on with this, but I would also point out that the labor market (at least for engineers) in the defense industry is designed to create a class of workers with security clearances who have an advantage in getting military jobs over everyone else. (Of course, these people become a natural constituency to protect military spending.) In a lot of cases, contractors will have to hire people and then wait for a year or more to get clearances, and in the meantime they don’t get much out of these people, so they would rather hire people who already have one.
Comment by diana —
January 6, 2008 @ 4:43 pm
Thoreau,
I don’t disagree that ramified defense tech *could* transition to civilian, I just don’t see that there is a stimulus which will do this.
The satellite technology to which you referred was originally all DoD, right? GPS technology….DoD, right? (In fact, early computer technology…Bletchley Park and other military sites…right?)
The list goes on. Sure, this doesn’t *have* to be defense-based, but a heckuva lot of it sure seems to be.
Right, wrong, or indifferent, it seems that the human animal is primed to respond to threats – real or imagined. What I’m saying here is that changing this is not merely a question of political economy, but of human nature, and tinkering with the latter by means of politics is very unlibertarian, isn’t it?
Comment by Thoreau —
January 6, 2008 @ 5:33 pm
Diana-
It is indeed true that some of the civilian tech that we enjoy is the product of defense. Now, I think there’s a strong argument that we would still enjoy many great innovations (albeit different innovations, at times) if more of those resources were directed to civilian uses (i.e. production rather than destruction).
However, for those who aren’t convinced, I would say that even with a significant reduction in defense spending (taking it to a more sane level) there would still be military R&D (even if not as much) and they would still be there to function as early adopters. The military is sort of a natural early adopter since (1) as a bureaucracy it is inefficient and apt to buy expensive and untested stuff and (2) it’s their job to be a bit paranoid, so they’ll want to be ahead of the curve.
I think with a smaller, saner defense budget we’d still have the military funding some R&D and serving as an early adopter, but they’d be complemented by more civilian R&D and early adopters. That’s not a bad thing.
Comment by Mr. Obscura —
January 6, 2008 @ 6:13 pm
The issue isn’t JDAMs and fighter planes. They are the “big ticket” items, and tend to draw the most press, hence the most fire . The largest component of the defense budget pays for the people employed directly be the defense department either as soldiers & sailors or as civilians. The largest component of that pays for – wait for it – their health care and retirement benefits. And that is guaranteed for life for all retirees and their dependents. So, as ever, there is no free lunch, unless you’d like to renege on the nation’s promise to its veterans.
And the practice of placing portions of big-ticket items in as many congressional districts as possible has far less to do with convincing Americans to support high defense spending than it does with convincing Congress to fund the projects. Directly pointing to jobs in the district is the easiest way to get a Congresscritter to vote for a particular appropriation. 43 States? Northrop-Grumman (who makes carriers) needs to work harder. Big-ticket fighter plane programs (the F/A-18 and F-22 come to mind) reach all 50 states, and are working on reaching 100% of all congressional districts.
As near as I can tell, I’m the only regular commenter here who directly derives his living from the military-industrial complex. But that doesn’t make me a hawk, just a dove with a moral conflict. A search of the comment archives will show me onside with our host on the wars in Iraq and Afghanistan since 2002. Though you may not wish to believe it, all that money isn’t going to the procurement of hardware nor going into the pockets of contractors, and it hasn’t since the Carter/Reagan buildup ended in 1985. Could we spend the money more wisely? Absolutely. But it will be a drop in the bucket until the Defense Department downsizes the number of people in the military and the civilians who man the beaurocracy.
Comment by Nicholas Weininger —
January 6, 2008 @ 6:27 pm
In the long term, I’m with Leonard: we can’t know where the energy now invested in defense manufacturing will eventually go. In the short term, though, there are plausible new directions for the types of expertise held by the people/companies that do this manufacturing. Thoreau has the right idea here with his Boeing example.
More generally, look at what the big defense contractors spend most of their effort doing: they do aerospace, electronic control systems, secure communications tech, transport vehicles, and the like. The parts directly concerned with killing people and breaking things aren’t very large, in either volume or cost, compared to these.
And all these have lots of civilian applications. Indeed, some existing defense contractors already do all these same sorts of things for both military and civilian markets; Boeing is one good example, and Honeywell, which I used to work for back in the late 90s, is another. In a more peaceful US these companies would just shift more of their production to the civilian sectors of the same industries they’ve always been in.
The medium-term result would probably be a glut in supply of some of the relevant products, which would be great for consumers but might drive some of these companies to downsize/consolidate/merge over time. But there’s no reason to expect some sort of immediate catastrophe.
Comment by huh —
January 6, 2008 @ 9:52 pm
I am a DoD employee with a science PhD.
.
DoD spending is an important channel for Congressional pork distribution. The convenience factors here include the patriotism defense; any weapon system arguably strengthens the US military, even as it consumes human and financial capital. Also the ’secrecy’ defense, and finally the fact that even the experts don’t know what technologies to support.
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Regarding the comparison to pyramid building – note the ongoing benefit to the Egyptian tourist trade.
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‘Plowsharing’ military R&D and production into nonwar uses is of personal interest. The defense industry is not operating in a capitalist economy, nor of course are the gov’t labs. This makes it tough to convert, on the institutional level (as Neel K commented) . As for the people… it varies.
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The abyss between academic science and defense R&D is far deeper than many appreciate outside the culture, or admit to inside it. Defense R&D spending, while a modest fraction of GDP, is a large part of our national investment in our future technological ‘edge’. This spending is critical for our economic competition.
Comment by Tony P. —
January 6, 2008 @ 10:45 pm
I can’t resist pointing out that this is neither a new phenomenon nor an unalloyed benefit. Over 2000 years ago, Herodotus reported that Egyptians he talked with were complaining about the already-ancient pyramids having made the place too touristy
– TP
Comment by Dave W. —
January 7, 2008 @ 7:33 am
Another idea:
The government should:
1. Lay off “huh.”
2. Allocate his salary and the portion of overhead fairly allocated to his terminated position to a scholarship fund for US citizens studying whatever branch of science it is that huh’s phD is in.
3. This will increase demand for teachers in whatever branch of science it is that huh’s phD is in.
4. This, in turn, will have two beneficial affects:
a. huh can get a job as a teacher
and
b. our national investment in our future technological ‘edge’, critical for our economic competition, will be more optimally allocated than it is under the current circumstances. Cause of huh spreading his knowledge like a taper that can light thousands of candles, instead of a bomb that can blow up thousands of Iraqis.
Comment by Monte Davis —
January 7, 2008 @ 7:42 am
Neel’s and Mr. Obscura’s comments are on point. The hardware and R&D are high-profile — but whether there’s combat going on or not, most of the money pays people involved in or supporting day-to-day operations.
A case in point for background: did huge sums go into the 1950s-1960s buildup of strategic nuclear arms and delivery systems? Yes — but over the years it was well under 15% of DoD spending, and even before the 1954 ‘New Look’ was conceived as a cheaper alternative to larger standing armed forces. That doesn’t make it less lunatic, but may help to keep our eye on the larger ball.
Comment by Doug T —
January 7, 2008 @ 10:45 am
I’m surprised a libertarian would frame the issue in this way–the defense department exists because the government is spending hundreds of billions of dollars to buy things from them.
If the government decided to chop that amount in half and spend the other 300 billion dollars on gigawidgets, then a huge gigawidget-industrial complex would spring up.
Or, if the government decided to cut defense spending and return the savings to taxpayers, then the taxpayers would go out and spend those hundreds of bilions of dollars in a bunch of ways, which would encourage a bunch of different industries which would rise up as the defense contractors declined.
Seems like your argument would apply to any and all government spending–the department of Health and Human Services is employing tens or hundreds of thousands of people with their budget, and chopping that budget would cause similar dislocations.
As a side note, back in the 90’s I remember seeing a statistic that defense spending was actually one of the least efficient means of producing jobs, in terms of the money the government spent to produce a single job. (Of course, most of these jobs are probably pretty good, high tech positions.)
And FWLIW, I’m an Army civilian employee with a Ph.D.
Comment by Michael L —
January 7, 2008 @ 11:21 am
Mr. Obscura has a very important point. It’s tought to imagine a transition from military to civilian production without having fixed the healthcare system. I’m sure you “good” libertarians don’t agree, but to me healthcare is at the center of most of our domestic issues.
Comment by Leonard —
January 7, 2008 @ 11:36 am
This notion that only by socialist spending on military technology can “we” keep our general tech edge? The purest poppycock.
First off, the “we” there matters. “We” is supposed to contain me. But I don’t care if I am a little behind you in my technical ability to slide a 2000 bomb down your chimney. It’s not something I value, and frankly, I wish you did not value it either.
But the larger point is that contrary to the state apologists, socialism does not beat capitalism. Sure, via the political means you can force investment. Over the short term you can achieve faster growth in any given area chosen by the state planners. But over the long term, you cannot and do not achieve better growth in all areas. This is for numerous reasons. State planners lack the information necessary to plan. The process of expropriation necessary to raise money is inefficient. Poor investments are often chosen by managers who have little or no stake in the outcome. But also, a nation subject to a continual drain on its GDP being dumped into largely useless military development is growing more slowly than it otherwise would.
The idea that the internet, or GPS, or velcro, or whatever would never have happened without military investment? Baloney. The engineered goods coming out of military investments are not magic. They are based on science, and all science that can be discovered by socialists also gets discovered eventually by capitalists.
The USA is superpower because it has a huge economy (meaning: many people with tremendous amounts of capital invested per person), not because of our military power. The military power is rooted in the economy, not vice versa. This is easily seen by simply observing the conditions which obtained 70 years ago, or 150 years ago. The economy came first. It is easy to create military power given a large economy; it has been impossible to be a significant military power with a small economy ever since guns were perfected.
Comment by Thoreau —
January 7, 2008 @ 12:31 pm
I largely agree with Leonard: You can’t build an army without money.
Comment by diana —
January 7, 2008 @ 12:38 pm
Thoreau,
“Now, I think there’s a strong argument that we would still enjoy many great innovations (albeit different innovations, at times) if more of those resources were directed to civilian uses (i.e. production rather than destruction).”
And I’m one of them. I’m not defending the “look how much good stuff has come from weapons” crowd. I think they are wrong.
I just think you are evading the point: why does it take a threat, real or perceived, to get people to re-order priorities?
I think it’s a deeply embedded ev-psych thing. I don’t think it’s just eeevil War Parties politicians implanting eeevil War Party ideas in folks’ minds.
Until we get real about this, no change is gonna happen.
Did you watch the latest Dem debate? Did you see how Obama, “the change candidate” advocated charging into Pakistan guns ablaze, if we find nuke terrorists there? It was Hillary, the so-called War Party candidate, who urged caution. None of the bloggers noticed this. Her sensible answer got howled down by the blogger/MSM wolf pack mob.
Comment by Tony P. —
January 7, 2008 @ 3:00 pm
While I agree with Leonard, I have to comment on this:
It might be that there is a feedback loop here. If so, it’s hard to tell where the circle starts or ends. Is it possible that part of America’s economic strength derives from her military dominance?
For instance, the capital that makes the US economy so productive is partly (but increasingly) foreign. One reason foreigners are willing to invest in the US is security — or at least, perceived security. Capital is ultimately real stuff (buildings, machinery) which can in theory (and sometimes in practice) be laid waste by war, or captured by invasion — see Kuwait. Capital is marginally safer in a country boasting the world’s mightiest military. Maybe “marginally” translates to “infinitessimally” in quantitative terms, but in a world where billions of dollars move in response to a change of two or three basis points, maybe that’s enough to matter.
For another thing, the US economy’s productivity still rests in large part on energy consumption, which still means in large part oil, which the good lord saw fit to hide in large part under heathen and socialist countries. It’s at least possible that US military power serves to counterbalance god’s wicked sense of humor.
For myself, I would vastly prefer to believe that my standard of living is not founded, at all, on my nation’s military might. But I wonder.
– TP
Comment by Leonard —
January 7, 2008 @ 5:36 pm
This is not a feedback loop in the classic sense of it. Rather, the military component of the loop is strictly bounded, and does not feed back as such.
You do need enough military might to create stable institutions. Obviously capital that is subject to redistribution by invaders is far less valuable (and thus less likely to be created in the first place, or accumulated). So at least some sort of national defense is necessary. But this is a low bar, seeing as the only people close enough to creditably threaten to invade us are Canada and Mexico. Also I suppose Great Britain was a serious threat back when she was still great. These days I expect we could deter Mexico, our greatest national threat, with just a few thousand men running a modest nuclear deterrent, seeing as Mexico is neither aggressive nor unfriendly. Maybe we’d need, oh, an army as large as 100000. We could run that on charity.
There is an irony here, that America of all the countries in the world is almost the best situated naturally, in terms of natural defense. Yet we outspend the world.
Above a very modest level, military spending is a brake on accumulation, not an accelerant. Because military spending diverts real resources that would otherwise be used as capital (in part; some would be consumed to make us happy). Also, once you’ve established the mass taxation system necessary to run a mass army, you’ve got the pieces in place to move onto other popular redistribution schemes.
Comment by Thoreau —
January 7, 2008 @ 6:37 pm
An argument could be made that the security of trade routes is also essential. Capital that can be sold to foreigners is valuable. Capital that is likely to be stolen en route to foreign buyers is less valuable.
Comment by diana —
January 7, 2008 @ 8:13 pm
“There is an irony here, that America of all the countries in the world is almost the best situated naturally, in terms of natural defense.”
I realize you did say “almost” but why do people always ignore Australia?
Because Australia of all the countries in the world is the best situated naturally. That’s why the Aborigines had it to themselves for 50,000 years.
Comment by Tony P. —
January 7, 2008 @ 10:41 pm
Leonard:
There are positive feedback loops and negative feedback loops, and I confess I don’t know whether US military power feeds back to US economic power with positive or negative gain. I do think that whichever it was a quarter-century ago, it’s probably not the same now. And I repeat that I would be ashamed if the feedback were in fact positive: living better than everyone else because you can beat up everyone else is not something to be proud of.
Living less well than you might, owing to a fetish for military power, is of course simply stupid. I am entirely open to the proposition that we Americans are collectively stupid.
The reputedly nimble capitalists of the world may be operating on old paradigms, in any case. The EU is economically robust, and probably just as safe as the US nowadays despite lacking a commensurate military might. If that’s true, and if the world’s capitalists begin to act accordingly, we will have definitive proof that the feedback loop is negative after all. Not that such proof would sway the jingos among us, mind you. It may take another quarter-century, and a $3 Euro, before any American politician can say we’d be better off with a much smaller military — without being considered as crazy as Ron Paul.
– TP
Comment by Leonard —
January 7, 2008 @ 11:40 pm
Most capital is not moved for trading. Rather capital tends to be fixed to the ground, and ownership of it is traded even as it sits there. Things which are moved in trade tend to be consumer goods, not capital.
Although some capital is shipped internationally, there’s two key things about it that make it much less attractive than fixed capital from the POV of looters. One is that mobile capital is, well, mobile. Just as animals are a lot tougher to prey on than plants, things-on-ships are a lot tougher to prey on than things-rebarred-to-the-Earth. You have to find them, they can run away, etc.
Second, a lot of the value of most capital is situational: it must be assembled just-so to facilitate production. Most of the stuff that moves in trade is still in a relatively low-value state of “not done yet”. For example, the USA imports steel from the third world, a lot of which is used to build factories and whatnot. But if you tried to make a living pirating steel on the high seas, you’d quickly find that it’s a low value commodity, even at $600/tonne.
The total amount of capital which moves internationally is a tiny fraction of that which exists.
In short, I’m not really buying the argument that security of trade routes is that important as an aspect of capital formation. It isn’t. It is important, rather, from the POV of consumption goods. Obviously that feeds back into capital formation — that’s what capital is for, after all, making consumption goods.
But as for how to provide security in trade, that’s another matter. Certainly the USA does not need to spend anything like what it currently does. In fact I don’t see a need for any state navy whatsoever — private contractors can easily provide whatever services are necessary, perhaps with letters of marque and reprisal from the Congress if those seemed necessary. International water and air is not like land, in that nobody lives there. So there’s much less of a common goods problem: security provided on the high seas is of no direct benefit to anyone, except a handful of shipping corporations, and they could just do it themselves if they had to.
Comment by Mary —
January 11, 2008 @ 2:12 pm
I would say that if you’re looking to obfuscate the subject, gigawidget is just the the term you’re looking for. As far as relevance to widget development, the government could use a few!