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Military Spending and Bastiat's "Unseen"

Tags Free MarketsTaxes and SpendingWar and Foreign PolicyInterventionism

02/29/2012Eric Phillips

[An army of] a hundred thousand men, costing the taxpayers a hundred million of money, live and bring to the purveyors as much as a hundred million can supply. That is which is seen.

But, a hundred million taken from the pockets of the taxpayers, ceases to maintain these taxpayers and their purveyors as far as a hundred million reaches. This is that which is not seen. Now make your calculations. Add it all up, and tell me what profit there is for the masses?

-Frédéric Bastiat

You will often hear self-styled conservatives say, "I support the free market and a strong national defense." But if by supporting a "strong national defense" they mean supporting a large and aggressive conventional military — as they almost invariably do — these two positions are mutually exclusive. A military establishment funded by taxation, inflation, and debt is just as destructive to the market economy as a welfare establishment funded by taxation, inflation, and debt. Every dollar spent on the military, just like every dollar spent on the Department of Health and Human Services, is a dollar not spent or invested in the civilian economy. Every person employed by the military or the firms that supply the military with equipment is a person not employed in the civilian economy. And since civilian employment and capital accumulation are the foundations of a prosperous capitalist economy, a conventional military can only exist at the expense of a fully functioning free-market capitalist system.

Pork-seeking congressmen, crank economists, and many laypeople believe that generously funding the conventional military is good for the economy. They point to the factories that manufacture tanks and fighter jets, the ports that build ships and service the navy, and the booming economies that surround military bases. But as Bastiat explained, they err in focusing on only "that which is seen." They neglect to consider the private-sector jobs and investment projects that do not exist because of the taxes necessary to fund the military. In other words, they miss "that which is not seen." Economists call these foregone alternative uses opportunity costs. The opportunity cost of funding the military is the sum of what could have been produced if the resources devoted to the defense establishment had not been drained from the private sector.

Of course, some resources need to be allocated to the production of security. But what makes the argument for a "strong national defense" anathema to the free market is that it cedes to the state the authority to unilaterally determine how much tax to collect from the population in the name of security. And as Hans-Hermann Hoppe argues, "Motivated (like everyone else) by self-interest and the disutility of labor but with the unique power to tax, a government's answer will invariably be the same: to maximize expenditures on protection."1

Since World War II, the US government has done just that. America's $700 billion military budget is as large as those of the next 20 highest military spenders put together. If one includes the cost of the police state and the interest on the debt incurred from past military spending, the United States spends well over $1 trillion a year on its empire. The government labels this spending as "defense spending," but the vast majority of it provides no defensive value whatsoever.

The US Navy, for example, maintains 11 massively expensive carrier strike groups, which would be excellently suited to redefeat the Imperial Japanese Navy, should Hideki Tojo make a second coming. In the modern world, however, these carrier groups are simply a hugely expensive way to get relatively few combat aircraft to a distant place. They would be extremely vulnerable to any modern opponent equipped with supersonic antiship cruise missiles and nuclear-powered submarines, and possibly even to resourceful guerilla groups armed with little more than a small explosive-laden boat or a hijacked oil tanker. Retired Navy Commander John Patch argues that both these conventional and unconventional threats render the US government's nuclear-powered aircraft carriers as "little more than slow-moving targets."

So why are these boondoggles maintained? According to the war correspondent and technology columnist Fred Reed,

Because, apart from the missile submarines, which have no role in combat, the Navy is the surface fleet. Many, many billions of dollars are invested in carriers and careers, in escorts for carriers, in countless men trained to run them. Mothball the carriers, and the Navy becomes a few troop ships useful for unopposed landings.… So: Does the Navy say to Congress, "We really aren't of much use any longer. We suggest that you scrap the ships and put the money into something else"? Mankind doesn't work that way.

The navy is hardly alone in this condition. The army and the air force are both designed to defend against a massive Soviet invasion of central Europe. The M1 Abrams main battle tank and the F-22 Raptor, to take just two examples, are incredibly expensive gas-guzzling machines, ill-suited to fight against the lightly armed guerillas of groups like al-Qaeda.

And it's not just the service bureaucracies, of course, that have a vested interest in preserving ineffective weapons systems and draining resources away from the productive civilian economy. The military-industrial complex — that "conjunction of an immense military establishment and a large arms industry" — has become extremely politically adept since President Eisenhower warned about its growing influence 51 years ago. In The Handbook on the Political Economy of War, Dr. Bernhard Klingen of the University of Mannheim succinctly explains how the defense industry gets its money:

The defense lobbyist represents the interests of a highly regulated industry. The armament market is characterized by little domestic competition, large public R&D funding, low transparency in contracting and a high degree of protectionism. Against this background the defense industry has an incentive to put strong emphasis on lobbying to maximize its profit. Since the defense lobby is a small and homogenous group, such activities are likely to be successful.

Further, Klingen continues, the defense lobbyist will "aim to ease the politician's reelection constraint by funding studies which call for a stronger defense policy." In other words, they support and enforce the inside-the-Beltway consensus that monopolizes political discourse among elites. And since elites seek to exclude people with views that challenge their power from all "respectable" debate, people with alternative viewpoints are marginalized and ignored. Ultimately the nonelite's only option is to pay the taxes and bear the brunt of the inflation that the defense lobbyists have convinced the state to impose.

Even in moments when the Pentagon-engendered atmosphere of perpetual crisis and war hysteria has temporarily abated, the hundreds of companies like Boeing and Lockheed have proven themselves prepared to fight off attempts to reduce military spending. They have prevented cuts to wasteful and obsolete programs by spreading the production of their weapons systems over the largest possible area. This tactic — while extremely inefficient in any conventional sense — ensures that their workers will be located in as many congressional districts as possible. And representatives will be less likely to vote to cut funding for weapons programs if that would lead to job losses for people in their districts. Franklin C. Spinney, in his seminal report "Defense Power Games," called this practice "political engineering" and cited the example of the much touted B-2 stealth bomber. When a coalition of congressmen tried to halt the development of the massively expensive plane in 1989, Northrop Corporation, the B-2's main contractor, released previously classified information that showed that tens of thousands of jobs were at risk in 46 states and 383 congressional districts. The campaign to cancel the B-2 promptly crumbled. To date, Congress has allocated a total of $44.75 billion for the production of just 21 of these bombers. And despite the propaganda from the Pentagon, the plane, according to Chalmers Johnson,

Has proven to be almost totally worthless. It is too delicate to deploy to harsh climates without special hangars first being built to protect it at ridiculous expense; it cannot fulfill any combat missions that older designs were not fully adequate to perform.

Weapons systems like the B-2 do not make America any safer. Their development, construction, and operation do not make America wealthier. But people overlook the true cost and wastefulness of these programs because they see imposing-looking planes and monstrous armored vehicles, and they see the military's factories, bases, and airports buzzing with workers, soldiers, and pilots. What they do not see is how the resources poured into these projects could be used in a more productive capacity.

There are only so many people, for example, who have the brain power to obtain PhDs in the hard sciences, and in 20th- and 21st-century America, a disproportionate number of these people have been employed by the military-industrial complex — from one-third to two-thirds of all technical researchers at any given time since World War II. According to the late Columbia University professor Seymour Melman,Download PDF this "has left many US civilian-products industries at a competitive disadvantage due to faltering product designs and insufficient improvement in industrial-production efficiency."2 To see the effect of the private-sector R&D shortage, Melman contended, one need only

go to the stores that now sell great arrays of "high tech" merchandise. Pay attention to the boxes for these goods, which typically state where the contents are made. Try the largest libraries and see if you can find texts that contain instruction for production of the products that have been disappeared from US manufacturing.

They are not there. Instead of improving designs for cars, trains, tractors, power plants, civilian aircraft, computers, and machine tools, vast numbers of researchers have been focusing their energies on designing bigger tanks, more intricate military aircraft, and more deadly robots. Many point to the civilian applications of certain military inventions, but these adaptations hardly make up for the vast amount of resources the state diverts from private-sector R&D. Melman estimated that a mere 5 percent of military technologies have civilian uses.3 The reason for this low amount of spillover is because, according to Robert McKenna,

Almost no commercial applications result from the development of particular weapons systems, only from basic research. In addition, the technologies developed for use in military systems are often too costly or sophisticated for commercial application.

It would be vastly more efficient and beneficial for society to devote resources directly to civilian research than to massively fund military research and hope for a small amount of useful spillover.

The R&D sector, of course, is just one part of the private economy affected by the Pentagon. The military-industrial complex also draws away successful businessmen, economists, historians, language experts, and high-achieving students from more productive pursuits. With hundreds of billions of dollars on hand, the Pentagon and its allies can offer their employees salaries, benefits, and prestige that most private-sector employers cannot match. As Robert Higgs cogently elaborates,

Military-economic fascism, by empowering and enriching wealthy, intelligent, and influential members of the public, removes them from the ranks of potential opponents and resisters of the state and thereby helps to perpetuate the state's existence and its intrinsic class exploitation of people outside the state.

In other words, as more and more people, companies, and institutions are drawn into the ambit of the military establishment, the state is strengthened to the extent that civil society is weakened. This phenomenon, in turn, leads to ever-more spending on the military, since the forces that oppose it increasingly lack the funding, credentials, and exposure to compete effectively with the proponents of endless military expansion.

Thanks to the continued success of this system of "military-economic fascism," approximately 1.5 millionDownload PDF people are on active duty in the military who, instead of trying to impose a modern nation-state on the tribes of Afghanistan and garrisoning bases in Japan, Korea, Germany, and Italy, could be in America working in construction, manufacturing, education, private and local security, or in the service industry. From an economic standpoint, the years these soldiers spend in the military are largely wasted. Not only do they create little of economic value during their periods of enlistment; many gain little or no experience useful in the civilian economy. Although the government's recruitment propaganda would have you believe that military experience is highly valued by employers in the private sector, the jobless rate for veterans of the Iraq and Afghanistan wars is 2.6 percentage points higher than it is for the general population. The experience of artillerymen, snipers, and front-line infantrymen is not easily adaptable to the civilian world. And while the skills of military mechanics and technicians are more valued, military credentials and certificates in these areas do not carry much weight with many potential employers. Some degree of retraining is necessary. So not only are the 1.5 million potentially productive members of the active-duty military robbed from the civilian economy; when these men and women retire from the service they have a difficult time assimilating into the private sector. And that's not even considering the effects of the hundreds of thousands of cases of post-traumatic stress disorder and depression that plague war veterans.

This simple discussion of the opportunity costs of the military — of the immense amount of wealth and manpower diverted away from the private sector and into a statist institution — should be proof enough that a truly free market is incompatible with a large, publicly funded military. And we have not even considered the distortional effects of the taxation, debt, and inflation that are necessary to fund it; the deleterious effects on companies that deal with and cater to the Pentagon; the further economic interventions implemented in attempts to fix these problems; how the existence of large militaries makes war more likely; how war destroys lives, capital, and the international division of labor; or how war leads to the further growth of the state. Even just considering what must be given up to have the military the United States has now, we can answer Bastiat's question, "what profit there is for the masses?"

None. Only losses.


Contact Eric Phillips

Eric Phillips is a writer from Philadelphia, currently studying economic history in graduate school. He is the founder of the blog Notes & Observations. His articles have been featured on Mises.org, LewRockwell.com, EconomicPolicyJournal.com, and in Taki’s Magazine.