NationMaster - Encyclopedia: Permanent war economy

The permanent war economy is a concept coined by Charles E. Wilson, referring to an institutionalized war economy —ie. a semi-command-type economy which is directed by corporation executives, based on military industry, and funded by state social spending. The term refers to the economic component within the Military-industrial complex (MIC) (aka. "the Iron Triangle") wherby the collusion between militarism and profiteering are manifest as a permanently subsidised industry. Wikipedia does not have an article with this exact name. ... War economy is the term used to describe the contingencies undertaken by the modern state to mobilize its economy for war production. ... Charles Erwin Wilson (July 18, 1890 - September 26, 1961), American businessman and politician, was United States Secretary of Defense from 1953 to 1957 under President Eisenhower. ... War economy is the term used to describe the contingencies undertaken by the modern state to mobilize its economy for war production. ... A planned economy is an economic system in which economic decisions are made by centralized planners, who determine what sorts of goods and services to produce, and how they are to be priced and allocated. ... A corporation is a legal person which, while being composed of natural persons, exists completely separately from them. ... The military industry is comprised of government and commercial industry involved in research, development, production, and service of military equipment and facilities. ... President Dwight Eisenhower coined the term military-industrial complex The term military-industrial complex (MIC) refers to a close and symbiotic relationship between a nations armed forces, its arms industry, and associated political and commercial interests. ... Iron triangle is a phrase typically used by American political scientists to describe what are deemed to be cozy relationships in U.S. politics between the legislature, government bureaucracies, and constituencies; which ultimately result in very tight policy-making circles. ... Militarism or militarist ideology is the doctrinal view of a society as being best served (or more efficient) when it is governed or guided by concepts embodied in the culture, doctrine, system, or people of the military. ... The act of price gouging in an undersupplied market. ... In economics, a subsidy is generally a monetary grant given by government to lower the price faced by producers or consumers of a good, generally because it is considered to be in the public interest. ...

Wilson had been the CEO of a General Motors subsidiary, and had been impressed with the productivity of U.S. industry during World War II. This period of economic growth brought the U.S. out of the Great Depression, and was driven by the social imperative, called the "war effort," as directed by the needs of the Department of Defense. Wilson warned at the close of the war that the U.S. must not return to a civilian economy, but must keep to a "permanent war economy."¹ Wilson was made Secretary of Defense under Dwight D. Eisenhower, and was largely instrumental in reforming the Pentagon as an instrument for facilitating a closer relationship between the military and industry. General Motors Corporation, also known as GM, is the worlds largest automaker. ... This article is becoming very long. ... Great Depression was a worldwide economic downturn which started in 1929 (although its effects were not fully felt until late in 1930) and lasted through most of the 1930s. ... In military affairs, the war effort refers to the harnessing of economic and human resources towards support of a military force. ... The United States Department of Defense, abbreviated DoD or DOD and sometimes called the Defense Department, is a civilian Cabinet organization of the United States government. ... Dwight David Ike Eisenhower (October 14, 1890 â€“ March 28, 1969) was an American soldier and politician. ...

Marxist theory

Some have claimed this to be 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. ... This article is becoming very long. ... Coloured world map indicating Human Development Index (as of 2003). ... For other uses, see Capitalism (disambiguation). ... Combatants Allied Powers: United Kingdom France Italy Russia United States Serbia Central Powers: Austria-Hungary Bulgaria Germany Ottoman Empire Commanders Douglas Haig John Jellicoe Ferdinand Foch Georges Clemenceau Nicholas II Woodrow Wilson John Pershing Wilhelm II Reinhard Scheer Franz Josef I Conrad von HÃ¶tzendorf Ä°smail Enver Ferdinand I Casualties... -1... 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. Military spending was around 16% of gross domestic product (GDP) in the 50s in the USA after 38% in 1944 during World War II. This spending rate has been in a slow decline since then and finally in the mid-90s it was only at about 2%. During the Vietnam War in 1968 it was 9% and in 2003 it was 4%. This strong decline in military spending during the 60s and 70s meant the end of the permanent arms economy and the return of capitalist crisis. The Cold War (Russian: Ð¥Ð¾Ð»Ð¾Ð´Ð½Ð°Ñ Ð’Ð¾Ð¹Ð½Ð° Kholodnaya Voina) was the protracted geopolitical, ideological, and economic struggle that emerged after World War II between a worldwide military alliance of capitalist states led by the United States and a rival alliance of communist states led by the Soviet Union. ... An Arms Race is a competition between two or more countries for military supremacy. ... IMF 2005 figures of GDP of nominal compared to PPP. A regions gross domestic product, or GDP, is one of the several measures of the size of its economy. ... 1944 (MCMXLIV) was a leap year starting on Saturday (the link is to a full 1944 calendar). ... 1968 (MCMLXVIII) was a leap year starting on Monday (the link is to a full 1968 calendar). ... 2003 (MMIII) was a common year starting on Wednesday of the Gregorian calendar. ... 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. Keynesian economics (pronounced ), also called Keynesianism, or Keynesian Theory, is an economic theory based on the ideas of 20th century British economist John Keynes. ... Tendency of the rate of profit to fall (TRPF) is a theorem in economics and political economy. ...

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. JÃ¼rgen Habermas JÃ¼rgen Habermas (born June 18, 1929 in DÃ¼sseldorf) is a German philosopher, political scientist and sociologist in the tradition of critical theory, best known for his concept of the public sphere. ... The term ruling class refers to the social class of a given society that decides upon and sets that societys political policy. ...

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. Tendency of the rate of profit to fall (TRPF) is a theorem in economics and political economy. ... 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. ... To meet Wikipedias quality standards, this article or section may require cleanup. ... Invest redirects here. ... In Keynesian economics consumption refers to personal consumption expenditure, i. ... 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 immensely influential German philosopher, political economist, and socialist revolutionary. ... 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, in the English translation) is a very lengthy treatise on 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. This raises the question, why capitalist should be prepared to give away parts of their profits if this does not serve directly their own interests, but “only” the interests of the system as a whole. The fall of the general rate of profit itself induces changes, however, which make it easier for the state in alliance with larger capital groups to intervene. So, 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, in the English translation) is a very lengthy treatise on 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. (Karl Popper in his The Open Society and Its Enemies, vol. 2 "Hegel and Marx", gives a brief sketch of Marx's economic theory and the role expenditures on arms might play, if consumption of workers does not keep up with production.) Sir Karl Raimund Popper, CH, MA, Ph. ... The Open Society and Its Enemies is an influential two-volume work by Karl Popper written during World War II. Failing to find a publisher in the United States, it was first printed in London, in 1945. ...

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, in the English translation) is a very lengthy treatise on 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. ... Tendency of the rate of profit to fall (TRPF) is a theorem in economics and political economy. ...

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. ... Hitler redirects here. ...

A different view

The case made by some Marxists, that military spending is necessary and useful for capitalism, has been contested. The central arguments against this position have been made by economists like Seymour Melman, Lloyd J. Dumas and John Ullmann. The critique centers on whether or not military spending has a "use value," i.e. a productive use within the economy. On the one hand, the macroeconomic stimulus of arms spending may be positive in the short run, when comparing such spending to the absence of any form of procurement. On the other hand, military spending represents serious opportunity costs. First, the economic benefits of spending in non-military areas may be greater, i.e. have greater muliplier effects. For example, an investment in a tank or plane is rapidly depleted and after the tank or plane is invented, leads to no further economic use value. Moreover, when the state fails to invest in key resources, this creates opportunity costs with respect to "socially necessary" or world competitive infrastructure investments. These costs are evident in depleted infrastructure, reduced spending on education, failure to develop massive investments in alternative energy and transit systems, and outbreaks of violence (such as riots) caused by uneven development. Seymour Melman (born December 30, 1917 in New York City; died December 16, 2004 in Manhattan of an apparent aneurism) was a professor emeritus of Columbia Universitys Fu Foundation School of Engineering and Applied Science[1] who wrote extensively for fifty years on economic conversion, the ordered transition from... Opportunity cost is a term used in economics, to mean the cost of something in terms of an opportunity foregone (and the benefits that could be received from that opportunity), or the most valuable foregone alternative. ...

The counterfactual argument is that the military provides spin-offs in civilian technologies. This argument is limited by the fact that military spending often blocks the very conversion of defense firms required in such spin-offs. Another argument is that militarism represents an overhead charge for imperialism, where the U.S. serves as the world policeman for its allies or perhaps benefits economically from plundering countries like Iraq. This theory also faces severe limits. One is the recent estimate that the costs of the Iraq war could total $2 trillion. Another is the fact that the world order for procuring oil was actually more stable before the Iraq War and that states can be bribed, i.e. it may be cheaper to bribe states to release oil than to steal it.

The U.S. government continues to pursue military Keynesianism as a way to reward military industrial corporations and native militarist elements within the country. This commitment occurs, some argue, because ideological commitments to civilian government spending have weakened and because of the dependency of regions, industries, and government workers on military spending.

Contents

Marxist theory

Military Keynesianism

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

Capital export

Question of deliberate policy

A different view

See also

References

Contents

Marxist theory GA_googleFillSlot("encyclopedia_square");

Military Keynesianism

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

Capital export

Question of deliberate policy

A different view

See also

References

Marxist theory