Paul Mattick 1959
Source: American Socialist, April 1959;
Transcribed: by Adam Buick.
EVER since Lord Keynes’ dictum that wars—like pyramid-building and earthquakes—may serve to increase wealth, it has
Paul Mattick 1959
Source: American Socialist, April 1959;
Transcribed: by Adam Buick.
EVER since Lord Keynes’ dictum that wars—like pyramid-building and earthquakes—may serve to increase wealth, it has been increasingly recognized that war and preparation for war are necessary aspects of the prevailing economy and a condition of its proper functioning. Because, in recent history, only inflation and war have resulted in full utilization of productive capacities, the question has been raised whether this association between war and full employment is an accident or a necessity. It is usually answered with the assurance that, although it is no accident, it is not a necessity, for government expenditures can lead to full employment whether they are geared to the needs of war or to the requirements of peace. With full employment as the sole goal of economic activity, even people opposed to war do not seriously object to the creation of ‘wealth’ in the form of armaments and military installation, even though they may prefer ‘wealth’ in the form of social welfare.
Quite independent of preferences, government spending includes an always growing amount for purposes of defense. The ‘military wealth’ of the United States is said to exceed $124 billion. This ‘Real and Personal Property of the Defense Department’ does not include investments in atomic energy estimated at $12.5 billion, nor the properties of the ‘National Plant and Equipment Reserve,’ nor the supplies and equipment in overseas depots, nor the military assistance to allied and favored nations. The great bulk of the inventory consists of things that can be used up, wasted, or that will become obsolete. The Defense Department is actually a tremendous business enterprise. In 1955, for instance, it spent more than $42 billion, or about one-seventh of the national income. It was directly responsible for the employment of close to 4.5 million people, or about 7 percent of the national labor force.
As always, so now, too, there is much talk of cutting government spending and reducing the budget deficit. This economy talk, however, does not include spending for military purposes. On this point both ‘savers’ and ‘spenders’ think alike. The ‘defense establishment,’ as the President made clear recently, ‘is an exception to the general desire of living within the amounts set by the Budget Bureau after it had cut the spending requests.’ Opposing all cuts and arguing for increased government spending, Truman’s former chief economist Leon H. Keyserling found it necessary to complain that ‘we remain content with a defense strength far below the minimum judged essential by most experts.’ But then, spending for defense loses its sinister implications when it is referred to as ‘‘rising cost of peace.’
Increased control of the economy by way of government spending seems to worry nobody, particularly because far more than half of it is thought to serve national defense. Despite a high rate of government spending there are still millions of unemployed and it was only under conditions of actual warfare, in which nearly half of the national product served the needs of war, that there was full employment and full use of productive capacities. Organized labor will certainly not object to increased government spending for whatever purposes, as this means jobs and a better position at the bargaining table. Neither big corporations nor small entrepreneurs oppose increased defense expenditures, no matter how much they may object to taxation and social welfare, since spending for defense does not restrict general market demand. Although government-financed social welfare schemes may interfere with private business interests, in military expenditures government provides both supply and demand simultaneously and takes part of the social product out of the marketing process.
Since government funds proper can come only from taxation, additional funds must be borrowed from private sources. Deficit financing, which covers government expenditures that exceed government income, is resorted to by the government in buying goods and services that would otherwise not be bought. This increases economic activity and even the profitability of enterprises filling govern demand. The increase of the national debt is limited by national productive resources. Deficit financing simply means that the government avails itself of part of means of production that belong to private capital. Increased production through government initiative is a kind of temporary ‘expropriation’ of private capital deficit financing, as the means to this end, gives the ‘expropriation’ its temporary character. The funds borrowed by government are only monetary expressions of its power to set unemployed resources to work. The rising national debt indicates that this power has been granted only temporarily and for a price, i.e., interest paid to the bond-holders. And because the ‘nation as a whole’ stands behind 