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If there weren't new jets, tanks, guns, bullets, contracts etc.. being made, how would this impact their economy/GDP? Would it have such a significant impact that it would cause another recession? These current wars can be debatable whether they were for political or for profit. What percentage of the US GDP is strictly military?

Here's chart of US total federal spending in 2015:

Total Federal spending

https://www.nationalpriorities.org/budget-basics/federal-budget-101/spending/

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    You need to demonstrate your assumptions, i.e. military and especially war spending helps the economy – K Dog Dec 4 '16 at 15:04
  • Not my downvote, but I think your question is better suited on Economics SE. – Rathony Dec 4 '16 at 16:10
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    I don't understand in which way this is even remotely offtopic, sorry. It may be MORE useful on Economics but doesn't make it offtopic here – user4012 Dec 4 '16 at 19:54
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    This appears to be about the "tangible benefits and costs of legislation", which is explicitly on topic. politics.stackexchange.com/help/on-topic – indigochild Dec 5 '16 at 15:15
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    One could look at how many jobs in the United States are in the arms industry, but 1. not the complete federal defense budget is spent on the domestic market and 2. the US arms companies also export a lot of products and also sell on the domestic law enforcement and civil market. Also, there would be an influx of 1.2 million unemployed soldiers on the employment market (plus a lot of civilian employees of the US armed forces), but also 600 billion dollar available for economic stimulus. I think in the end the impact would be far too complex to estimate. – Philipp Dec 5 '16 at 15:29
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We don't have to wonder. The United States has done this repeatedly. For example, at the end of the Cold War, military spending dropped as much as it would need to drop now to disappear. From a high of 6.6% in 1982 to a low of 2.9% in 1999. In 2015, defense spending was 3.3% of GDP. At the end of World War II, it dropped much more.

The basic pattern is that at the end of a war, defense spending drops, there is a recession, and then there is a recovery. The economy is stronger after the recovery than during the war. Similarly, base closings have positive long term effects on employment on average (PDF). Of course, that can be incorrect in individual cases.

It's a specific case of the spoons fallacy. It's true that doing unnecessary work can generate jobs. However, we can do better. Necessary work can make it easier to do other work. So it not only generates the immediate job but other jobs as well.

Repair a tank, and you have a working tank, useless for non-military purposes. Build a windmill, you have a windmill. It produces electricity that can then help do other things. For example, it can make light that can be used to work an overnight shift on highway repair. Or to run power tools. Or both.

Some military spending does have positive side effects. For example, some research can be used for civilian purposes as well. But most of it is just a dead weight loss economically.

Multipliers are often misused. Yes, spending on defense can create other jobs. But so can spending on almost anything else. You can't compare one employment category with another and only use multipliers on one. You can get a similar multiplier with different spending or with a tax cut (which enables more spending or investment).

Note: none of this should be taken to mean that defense spending is unnecessary in the world that actually exists. But we shouldn't pretend that defense spending is free either. It's not a jobs program. It is a necessity for security.

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That's difficult to determine because there are too many variables.

What would be done with the money that would be spent? Would there be a program where non-defense contracts are offered to those companies to help them to transition to some sort of peacetime production? Or would the funds be applied towards national debt? Or would the funds be returned to the taxpayers? If so, how would that be apportioned/doled out?

Even if we had some very specific details laid out, the answers would be largely speculative. We'd have to look at economic benefit of less spending, or spending on capital goods or products that actually get used for the benefit of the economy (using weapons or munitions generally does not benefit the economy, beyond the spending used to produce them)? What would be the expense or hit to the economy of defense industry jobs being cut? How drastic of a change over what time would that be?

Probably too many moving parts and variables to give a pat answer, I'm afraid.

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To a great extent it depends on what the money is spent upon instead. Dollars spent on military procurement (e.g. new aircraft carriers, fighter jets, missiles and tanks) goes to defense contractors who create relatively few jobs per dollar spent and that spending has relatively low "multipliers" in the economy because the end product does not itself produce anything that contributes to the economy (except, of course, by preventing armed hostiles from invading a la the Vikings and screwing everything up, which is, of course, the primary reason we spend money on defense).

Money spent on serviceman compensation produces far more jobs per dollar spent than major military procurement spending and also partially constitutes an investment in human capital that will generate future economic returns once the soldiers and sailors return to civilian life. So, cuts to this kind of spending hurt the economy more.

If the money that would otherwise be spent on defense is spent on things that led to employment and advance the cause of economic growth (e.g. deferred investments in infrastructure and education), then the economy will do better - although there will probably be a lag as decisions made in reliance on the status quo don't pan out as planned and people gear up to utilize the diverted funds in some new enterprise that the economy didn't have before - so short term pain followed by long term gain or long term losses. If the funds are invested in ways that don't help employment and the economy (e.g. German Treasury bonds), then the economy will probably be worse off.

  • By that argument, a vast majority of US economy has low "multipliers", e.g. entertainment, services, medical care for senior citizens AT ALL (end product does not itself produce anything that contributes to the economy). – user4012 Dec 7 '16 at 2:18
  • Re "produces far more jobs...": this seems to be a "noncomparitive comparitive"; please specify more jobs than what. – agc Jan 7 '17 at 10:33
  • @agc The reference is to the previous paragraph. Defense spending on major military procurement generates fewer jobs per dollar spent than defense spending on serviceman compensation, and serviceman compensation is also a greater investment in future economic productivity because it creates human capital compared to major military procurement which is not an investment in economically productive capital. – ohwilleke Jan 7 '17 at 17:09
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Your question implies that there is no opportunity cost incurred as a result of the government spending hundreds of billions of dollars per year on jets, tanks, guns, bullets, contracts, etc.

PoloHoleSet's point about there being too many variables is probably the best kind of response you're going to get. Why? Because an economy has a quintillion moving parts. The military industrial complex is merely billions of moving parts.

When you consider the thousands or millions of jobs in the private sector that exist to keeping our military supplied, there are a lot of people who would be doing other things if that industry didn't exist. Like working in other industries, going back to college or becoming entrepreneurs.

So, lets say that in some alternate universe there weren't new jets, tanks, guns, bullets, contracts etc.. being made, but that money was being spent by the government on infrastructure, scientific research, space exploration, etc. Or even crazier, what if that expenditure was subtracted from our tax burden, what would the citizenry do with with all that available capital.

Imagine if instead of working from January to March (or May/June, depending on your tax bracket) to pay your income tax, that money was yours to keep and do with as you please. Think of the savings people could accumulate and use to start a business or invest in a startup or grow their business or buy a house... the possibilities are innumerable.

Not to be insulting, because I mean this with all due respect, but your question is a bit short-sighted. Your question is like a southern plantation owner in 1845 asking "if there weren't slaves in the field plowing and picking cotton, corn, etc.. how would this impact the economy/GDP?" It's hard to say exactly, but we do know that there are better, more ethical alternatives to utilizing slave labor. We know that actually paying workers becomes more profitable for business owners because you get more productivity out them as a result of it being a voluntary relationship.

The 19th century was a fantastic experiment in laissez faire free-market economics and it produced the greatest creation of wealth, improvements in standards of living and working conditions in human history. Likewise, perhaps freeing up the hundreds of billions in wealth that is currently being directed by the federal government would allow all the moving parts of the economy to make the most intelligent decisions possible as to where to allocate those funds.

When private profit is derived from state expenditure then incentives become aligned with the state... and there is nothing laissez faire about that.

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    Re "the 19th century was...": as worded, it's unclear if this generalization is meant to encompass slave owners and slavery or not. – agc Jan 7 '17 at 10:39
  • @agc i see what you're saying, thank you for pointing that out... it made a lot of sense to me at 1AM, but now I can see why you would think its a non-sequitur by the way it was worded. I have made an edit that should make it more clear. – holaymolay Jan 7 '17 at 16:49

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