commissioner.org
| Source | Jim Devine |
| Date | 07/05/06/20:53 |
| On 5/1/07, Liz Chimienti >"It is often believed that wars and military spending increases are good for the economy," said Baker. "In fact, most economic models show that military spending diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment." Yes, wars & military spending are good for the economy _in the short run_, in a Keynesian (demand-promoting) way. But in the long run, if the economy gets to something close to normally-defined full employment, it hurts growth, because the supply side is hurt. one problem with this notion is the idea of technical spin-offs from the military. However, these are much more expensive to produce than those arising from investment in civilian sectors. The military sector is much more wasteful. As for the reduction of employment, it's much less clear. If the economy gets close to normally-defined full employment, then there's no change in employment. That's because such full employment is defined in terms of the supply of labor-power, not the demand. If military spending hurts technical change, as I think it does, that would hurt labor productivity growth. Ironically, that helps employment, all else constant: the same amount of demand for goods and services implies more employment than with high labor productivity. Dean Baker used a specific model of the US economy. I don't know that model and I cannot judge its validity. |
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