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It is often argued that the USA is constantly at war because the military industrial complex benefits from it in terms of public employment, and the moguls profit billions of dollars.

However, I don't understand how the overall US economy benefits from it.

For example, if the US government purchases billions of dollars of weapons and uses that to fight wars or donate them to wars, this is an expense that is not directly recoupable.

If there is no monetary flow from outside the US economy into the US economy, the USA is practically indebting itself over the years.

The burning example is Afghanistan. The USA spent trillions of dollars and finally pulled out because of expense overruns. So, it can be concluded that the Afghan war was a loss project for the USA.

So, how does the US economy benefit from wars?

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    The US benefits from war (because they sell weapons), not necessarily from participating in them. E.g. see WWII.
    – uberhaxed
    Jan 14, 2023 at 22:51
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    If you are talking about the military complex and moguls profiting from it why would the rest of the economy matter?
    – Joe W
    Jan 15, 2023 at 0:04
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    The people who are doing this to get rich and get more money don't necessarily care about the economy as a whole, just that they are making money themselves. This isn't something that is unique the the military complex either.
    – Joe W
    Jan 15, 2023 at 3:29
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    @user366312 The Ukranian war, and sanctions against Russia, has provided the US a big entry to the European market to sell their costlier liquefied gas as an alternative to the Russian natural gas. (And they are currently profiteering from it as they currently sell it to the Europeans at 4-5 times higher price than what Americans pay for it). The less gas Russia can sell, the weaker its economy gets, while Americans can sell more and get richer.
    – sfxedit
    Jan 15, 2023 at 4:33
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    @convert, Both. E.g., Ukraine war is a proxy war.
    – user366312
    Jan 15, 2023 at 21:47

3 Answers 3

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There are 3 ways the US can economically benefit from militarization. Only one really requires "going to war" and only under particular circumstances at that:

Weapon exports

The US benefits from rather massive weapon exports. No actual war is needed.

Military spending benefits a large slice of US society

As other answers have stated, there is very much the notion of the military industrial complex.

Eisenhower, 1961:

A vital element in keeping the peace is our military establishment. Our arms must be might, ready for instant action, so that no potential aggressor may be tempted to risk his own destruction. . . . American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions. . . . This conjunction of an immense military establishment and a large arms industry is new in the American experience. . . .Yet we must not fail to comprehend its grave implications. . . . In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

This doesn't require going to war either. To be clear, the benefit to US society as a whole, is not a given at all. Rather the opposite. Foregoing the DoD $857.9B for FY 2023, might be used for social/environmental goals, it may allow cutting taxes, it may allow paying down the debts. As a whole, US society would benefit from reapportionment, in a safer world. But for the men and women employed in defense industries and in the armed forces, that spending is a boon and that creates a powerful constituency to keep military spending high. That's why the F35 project deliberately has contractors in almost every state and that's why the DoD has such troubles closing bases it doesn't need anymore.

Loosening up purse strings:

The third way, which does require going to war, happened in 1940-41. Remember that the Great Depression had been made worse by governmental budget cutting - motivated by lower tax intakes. It took a while for the idea of spending money to get out of the self-reinforcing death spiral took root.

Once the US went to war the spigot of government spending was opened wide, Keynes won the day, and for various macro-economic reasons the pent up US underperformance was reversed. As mentioned, yes, the industrial competitors to the US had also suffered grievous reverses during WW2 so that helped as well.

The notion of wars stimulating economies is not that controversial, but while an occasional war may do so by concentrating spending which ramps up industrial capacity and spreads costs over time, it is hard to see frequent wars being a benefit.

Another dimension here is increased technological advances during wartime: WW1 brought us the airplane, WW2 radar and jets. (And many others). But the world in 2023 is very different from 1914 or 1939: a lot more technological innovation is driven by consumer/commercial demand rather than cutting edge military investments. Especially when Western weapon systems have 15-20 year design cycles in peacetime.

But the only one of the three requires going to war and is a benefit to US society as a whole is not a frequent type of event. Furthermore, Keynesian spending is well entrenched, some would say too well, entrenched in Western thinking anyway.

Resource acquisition/commercial interests:

Certainly some would argue that the US gains from access to resources/contracts as a result of war. Does it? The clearest example of that happening is the 2003-2004 reworking of Iraqi laws under Paul Bremer, to allow for privatization and preferential access to contracts for companies from "deserving countries". The end result was most certainly not of great benefit to the US though some well-connected US companies benefited handsomely.

From February 2022 on, one might however mention a somewhat forgotten reason: keeping a nation and its supply lines safe and independent. Yes, military spending can trigger arms races and become self-fulfilling prophecies, but it would be remiss to forget that the US is far from the only powerful country that tends to resort to military action.

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"The overall US economy" is not an entity that makes decisions. So the question of whether it acts in its own best interest is ill posed.

In the whole economy there are countless entities who (try to) make decisions in their own individual interest. The "US economy" is the net result of all those decisions (which are made in the context of changing external conditions as well). It is not a thing that acts on its own.

In the case of whether to go to war or not, the actors that make decisions are politicians (and - indirectly - the people who advise and lobby them, and the voters). It's entirely possible for corporations who will profit from war to want to influence politics so that there is more opportunity to sell military goods, and for the resulting decisions to be good for the corporations and bad for "the US economy" as a whole.

However "the overall US economy" also doesn't have a bank account. When some actor in the US spends money, "the US economy" doesn't lose out. When we talk about wanting the economy to grow, that's basically the total amount of "stuff" produced by the economy. It's entirely possible for the US economy to be bigger in the universe where the US government goes to war and needs to buy a lot more military equipment (which means it has to be produced, which means people have to be paid to make it, which means the things they buy with their salary have to be produced, which means the people who made those things have to be paid, etc etc), and for the US economy to be smaller in the universe where the US government doesn't go to war and doesn't lose a bunch of equipment and so spends less replacing it.

The government does have an account of course. If the government spends money on a war then that money isn't being spent on something else (though most probably the government will just borrow more money). But whether the government has more money is a totally separate issue to whether the economy grows. (And some would argue that it is a third totally separate issue whether any of this is actually good or bad for the people of the USA)

The "US economy" is not the money or the spending power of the actual entity known as the USA.

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  • My point was: if there is no monetary flow from outside the US economy into the US economy, the USA is practically indebting itself over the years.
    – user366312
    Jan 15, 2023 at 1:26
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    @user366312 If there's net negative money flowing into the government's accounts then the government is growing more indebted. That can happen whether or not there is money flowing into the US economy, they are two completely different things. You seem to be conflating the two. They're not even the same kind of thing; money flowing into or out of an account is very different from money flowing into or out of an economy.
    – Ben
    Jan 15, 2023 at 2:23
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    @user366312 if a country had 0 trade with any other country, it can still have an economy that grows or shrinks. Jan 15, 2023 at 3:08
  • @user366312 You could have made this argument centuries ago when the US didn't have Federal income taxes, as the lion's share of revenue was tariffs. But with income taxes as the largest portion of revenue I don't think this can be remotely true. So long as people within the US trade with people within the US (so people have income), the government can operate.
    – uberhaxed
    Jan 15, 2023 at 6:11
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    make decisions in their own individual interest => aka grift :-) Jan 15, 2023 at 23:07
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I think there are some questionable premises that the question is based on (e.g. the US is constantly at war, there exists some moguls that benefit, etc.) but even ignoring that, this can be answered from a purely economic point of view.

The begin with, the US Department of Defense is the largest employer in the world. Second, the US is the country with the largest economy in the world as of 2017 (which is likely still the case and was the case for many decades before 2017). The US federal government spends the third largest partition of its budget on defense as of 2023 (behind heathcare and pensions). Taking this into account, war would benefit the US more than any other country as it employs more people than any other country in the DoD and it spends the most out of any other country on defense.

Basic economics would follow: if a large number of people are employed and a large amount of federal money is spent keeping people employed by proxy (i.e. defense contractors) that the US benefits from an engine that supports its spending patterns. These (e.g.) defense contractors can take their de facto subsidies and spend it on ice cream, cars, and houses which keep other people employed. The assessment that their exists some weapons baron that keeps all the money and store it in his swimming pool Scrooge McDuck style is simply not how the US operates. After all, with the rare exception of people (such as lottery winners), those with a lot of money are in fact very cash poor and all of their money is tied up with running businesses or giving money to people running businesses so it flowing through the economy (in the form of investments).

Now historically, the US did in fact benefit from others going to war because of policies and laws such as cash and carry and the lend-lease act. Obviously, the US made a lot less money (remember that a large portion of federal revenue came from tariffs from imports and exports) when these exports decreased when the US had to enter these wars. As a historical note, the US did in fact benefit largely from WWII, since not only did they make a lot of money from sales and loans, but the US didn't have fighting on its industrial base (or the mainland at all for that matter), whereas everyone else had bombed each others factories and farms. So the US had a long period of time where there were no* competitors to its cars, wheat, and ice cream (e.g.).

*Other countries, particularly the anglosphere such as Canada and Australia, also came out unscathed, but mostly used their newfound political clout to formally get out of colonial relationships, a trend that followed for the next 30 years as colonial powers no longer had the capacity to manage their colonies.

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    The second and third paragraphs are committing a classic economic fallacy, usually considered an example of the broken window fallacy, by neglecting the opportunity cost of military spending. Eisenhower himself made this point in his 1953 "Chance for Peace" speech: "Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed...". This isn't an argument against military spending per se, but is a rebuttal of what is sometimes called "Military Keynesianism". Jan 15, 2023 at 12:52
  • Indeed. The argument "The military-industrial complex generates jobs" is fallacious. The government could just as well generate jobs by hiring those people to do something that has more of a net-benefit for US society than building weapon systems and unleashing them on some other countries. Or just pay people welfare and subsidiaries for nothing which they can then inject into the economy. The net effect on the economy would be the same. Unless, of course, all those military expenditures also solve a different purpose which is a net-benefit to the United States and its citizens.
    – Philipp
    Jan 16, 2023 at 12:12
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    @Philipp the question asked how the US benefits and I simply replied with sources stating that it's a significant portion of the economy. Completely unlike your unsubstantiated and unsourced comment. Comments are for improving answers, not complaining about how your government is run or talking about hypotheticals.
    – uberhaxed
    Jan 16, 2023 at 19:09

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