NationMaster - Encyclopedia: Permanent arms economy

The permanent arms economy is a Marxist theory which seeks to explain the sustained economic growth which occurred in the decades following World War II, especially amongst developed countries. Marxists developed the theory when the anticipated stagnation of capitalism which had previously followed World War I did not recur. When post-WWII economic growth came to an end with the 1973 oil crisis and gave way to a new period of deepening stagnation, Marxists viewed this as a typical development of late capitalism. Marxist theory is an academic specialization in Western academias. ... Accumulated GDP growth for various countries. ... Combatants Allied Powers Axis Powers Commanders {{{commander1}}} {{{commander2}}} Strength {{{strength1}}} {{{strength2}}} Casualties 17 million military deaths 7 million military deaths {{{notes}}} World War II, also known as the Second World War, was a mid-20th century conflict that engulfed much of the globe and is accepted as the largest and... A developed country is a nation that enjoys a relatively high standard of living through a strong high-technology diversified economy. ... Wikiquote has a collection of quotations related to: Capitalism Capitalism has been defined in various ways. ... Combatants Entente Powers Central Powers Commanders {{{commander1}}} {{{commander2}}} Strength {{{strength1}}} {{{strength2}}} Casualties > 5 million military deaths > 3 million military deaths {{{notes}}} World War I, also known as the First World War and (before 1939) the Great War, the War of the Nations, War to End All Wars, was a world... At the height of the crisis in the United States, drivers of vehicles with odd numbered license plates were allowed to purchase gasoline only on odd-numbered days of the month, while drivers with even-numbers were limited to even-numbered days. ... Late capitalism is a term sometimes used to refer to capitalism of the late 20th century. ...

The theory of the permanent arms economy commences with a difference between the period after the First and the period after the Second World War. Whereas after the First World War state expenditures for arms were soon cut back to peace levels, after the Second World War state expenditures on arms remained very high due to the developing cold war and the arms race. These continuing strong expenditures on arms are according to the theory of the permanent arms economy the reason for the long boom up to the early 70s. Arms expenditures were around 16% of gross domestic product in the 50s in the USA. They fell back, however, to about only 2% in the mid-90s. This strong decline in armaments expenditures during the 60s and 70s meant the end of the permanent arms economy and the return of capitalist crisis. For the generic term for high-tension and / or indirect struggle between states, falling short of actual open hostilities, see cold war (war). ... An arms race is a competition between two or more countries for military supremacy. ... Gross Domestic Product (GDP), a calculation method in national accounting (see Measures of national income and output) is defined as the total value of final goods and services produced within a countrys borders in a year, regardless of ownership. ... In economics, crisis is an old term in business cycle theory, referring to the sharp transition to a recession. ...

The different versions of the theory differ in the way to explain the exact mechanism how armaments expenditures did stabilise the capitalist economy. A more “Keynesian” version is to be distinguished from an approach, which is based on the law of the tendency of the rate of profit to fall. Keynes reading from his General Theory Keynesian economics (pronounced KAYNzian), is an economic theory based on the ideas of John Maynard Keynes, as put forward in his book The General Theory of Employment, Interest and Money, published in 1936 in response to the Great Depression of the 1930s. ...

Military Keynesianism

The stabilising effect of armaments expenditures on the economy is more or less explained the same way as “non-military” Keynesians explain the effects of their policy. Therefore, additional explanations are needed as to why it is necessary to use military expenditures instead of just civilian useful state expenditures. Several reasons are put forward: Military Keynesianism is a government economic policy in which the government devotes large amounts of spending to the military in an effort to increase economic growth. ...

1) “Legitimation crisis of late capitalism” Legitimation is the act of providing legitimacy to a child born out of wedlock. ...

According to Jürgen Habermas capitalism will suffer from a “legitimation crisis” if there is too much state intervention, because this will lead people to ask for more. Capitalism will no longer be perceived as a system ruled by quasi-natural laws, but as something that can be formed by politics. An external threat to be countered by government expenditures on arms, however, avoids this danger for the ruling class. Habermas speaking with Cardinal Joseph Ratzinger, now Pope Benedict XVI, 2004 This article is about JÃ¼rgen Habermas. ... In Marxian political economics, the ruling class refers to that segment or class of society that has the most economic and political power. ...

2) The balance of forces between the working class and the capitalist class will be shifted in favour of the working class if there is too much spending on social welfare and other items benefitting working class people. The term working class is used to denote a social class. ... ...

The end of military Keynesianism came when competitors to the US, like Germany and Japan, the countries that had lost the Second World War, were not allowed or could avoid building their own military machine. They were increasingly allowed to export arms, however. Finally the US could no longer play the role of the world Keynesian but had to prepare for competition with nations like Japan and Germany. This resulted in cutting back on arms expenditures, thus bringing back crisis to world capitalism. Competition is the act of striving against another force for the purpose of achieving dominance or attaining a reward or goal, or out of a biological imperative such as survival. ...

The law of the tendency of the rate of profit to fall

Other Marxists like Chris Harman or Michael Kidron oppose any Keynesian explanation. For them the decisive cause is the “siphoning off” of profits away from private investment expenditures to armaments expenditures, which count as “consumption” in the System of National Accounts. Harman emphasises that contrary to Keynesian assumptions arms expenditures were not financed by public debt but by taxes. Governments were able to keep public debt in check even though they had huge outlays for arms. Armaments expenditures did not work along Keynesian lines but because they interfered with the workings of the law of the tendency of the rate of profit to fall. hi im chris my last name is harman and i enjoy talking to other gay men and taking it up my arse any one interested in duble penetration phone this number 07881648241 i live in bournemouth and often atend gay clubs if u see me feel free to grab my... Michael Kidron Michael Kidron was a revolutionary thinker and cartographer. ... Profit is a positive return made on an investment by an individual or by business operations. ... Investment or investing is a term with several closely-related meanings in finance and economics. ... Consumption is the using up of a resource. ... Measures of national income and output are used in economics to estimate the value of goods and services produced in an economy. ...

The traditional explanation for the law of the tendency of the profit rate to fall goes like this:

Karl Marx assumes that the value composition of capital c : v rises with technical progress and as a means by capitalists to raise labour productivity. This means that the rate of profit must eventually fall, if the rising value composition of capital is not counterbalanced by a rising rate of surplus value s:v. (The value composition of capital is often called organic composition of capital, which is, however, defined by Marx in Das Kapital, volume I, as the value composition of capital insofar as it reflects the movement of the technical composition of capital.) In economics, the profit rate refers to the relative profitability of an investment project or of an capitalist enterprise or for the capitalist economy as a whole. ... Constant capital (c), is a concept created by Karl Marx and used in Marxian political economy. ... Constant capital, or c, in Marxian political economy is one of the two forms that capital adopts in the workplace, in contrast to variable capital (v). ... Surplus value, according to Marxism, is unpaid labour that is extracted from the worker by the capitalist, and serves as the basis for capitalist accumulation. ... Karl Heinrich Marx (May 5, 1818 Trier, Germany â€“ March 14, 1883 London) was an influential German philosopher, political economist, and revolutionary organizer of the International Workingmens Association. ... The organic composition of capital (OCC) is a concept created by Karl Marx in his critique of political economy and used in Marxian economics as a theoretical alternative to neo-classical concepts of factors of production, production functions, capital productivity and capital-output ratios. ... Das Kapital (Capital) is a very large treatise of political economy written by Karl Marx in German. ...

If, however, profits are not spent on constant capital, but used for something else, the rise of the value composition of capital is slowed down if not stopped altogether. Usually, the falling rate of profit is linked to the tendency of concentration and centralisation of capital (as described by Marx in Das Kapital, volume I). Firms become larger and larger. Large firms take over small firms. Concurrential capitalism becomes monopoly capitalism. The nature of capitalist competition changes. Firms no longer compete with each other inside branches but across branches. As a result it is no longer necessary to “outproduce” competitors. The demand for investment goods drops. Capacities of investment firms lay idle. These overcapacities in the investment goods industry threaten to trigger a downward spiral thus deepening the crisis. In economics, market concentration is a function of the number of firms and their respective shares of the total production (alternatively, total capacity or total reserves) in a market. ... Das Kapital (Capital) is a very large treatise of political economy written by Karl Marx in German. ...

That is why it is crucial that demand for armaments goes to what Marx called department I, the investment goods branch. This is the very department, which due to the changing character of competition with monopoly capitalism lacks demand for its products.

Weapons are technically close relatives of investment goods like machines. The demand for weapons by the government can therefore stabilise production of the investments goods industry, thus fending off a downward spiral into depression. The government buys goods of the surplus production and can realise surplus value for single firms. In this way it can stabilise capitalism. The government cannot, however, create surplus value. Expenditures on arms are economically “consumption” or waste, not investment. But this surplus value would not have been realised anyway, due to lack of demand for investment goods, which is a characteristic feature of monopoly capitalism. What the government can do is to fend off a downward spiral which often is triggered by lack of demand, causing lay-offs, reducing demand even further and so on. Due to armaments expenditures by the government the general rate of profit does not fall even further due to vicious circles but at least gets some stabilisation.

By this mechanism crisis could be postponed until the early 70s, when finally the internal contradictions of the logic of capital also took hold of the permanent arms economy with rising rates of inflation, increasing government debts and so on. Also with this version of the theory, the free riders like Germany or Japan forced the US to cut back on armaments expenditures. In economics and political science, free riders are actors who consume more than their fair share of a resource, or shoulder less than a fair share of the costs of its production. ...

Capital export

A similar effect can result from capital exports. Again profits are siphoned off from private investment. Marx (volume III of “Das Kapital”) mentions capital export as a countervailing tendency for the tendency of the profit rate to fall. The reasons, he puts forward, are that if capital finds in other parts of the world areas with lower costs and higher profit rates, capital exports increase the average rate of profit. It is Henryk Grossman (and Marx’s “Grundrisse”), who argues that capital exports in themselves are a cause, which postpones a crisis, which otherwise would follow from the rising value composition of capital and the tendency of the rate of profit to fall. Das Kapital (Capital) is a very large treatise of political economy written by Karl Marx in German. ... Henryk Grossman/Grossmann (1881-1950) was born in KrakÃ³w and studied law and economics in KrakÃ³w and Vienna. ... The Grundrisse is a lengthy work by the German philosopher Karl Marx, completed in 1858. ...

Question of deliberate policy

Some authors emphasise that the permanent arms economy was not something planned by capitalists. It was like a lucky fate, which came upon monopoly capitalism by special circumstances, which cannot be repeated at will or by planning. This contrasts with the view of the German Marxist Alfred Sohn-Rethel who with a rather similar theory claims that the idea of an arms economy was applied rather deliberately in the Germany of the 1930s to fend off a crisis for German capitalism. Based on analyses which were in fact influenced by Marxist theory, German capitalists came to the conclusion – according to Alfred Sohn-Rethel – that only arms expenditures as a kind of waste could “save” German capitalism for the moment. Thus, they decided to opt for Adolf Hitler and his promises of increasing military expenditures. Alfred Sohn-Rethel (born January 4, 1899 in Neuilly-sur-Seine near, today in Paris; died April 6, 1990 in Bremen, Germany) was an economist, a philosopher especially interested in epistemology. ... (helpÂ· info) (April 20, 1889 â€“ April 30, 1945) was Chancellor of Germany from 1933 and FÃ¼hrer (Leader) of Germany from 1934 until his death. ...

Contents

Military Keynesianism

The law of the tendency of the rate of profit to fall

Capital export

Question of deliberate policy

See also

References