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In his 1961 farewell address, President Dwight D. Eisenhower warned of the dangers of the military-industrial complex. While arguing for its necessity, he also stated that we must guard against its potential dangers to our democratic processes and liberties. This was not the first use of the term military-industrial complex. Charles Trevelyan of the United Kingdom first used it in 1914, but with Eisenhower's warning it became part of general political discourse. The military-industrial complex refers to the combination of two powerful entities in U.S. society. The first is the military establishment. The federal government spends billions of dollars annually keeping millions of men and women working to ensure national security. Since World War II, a permanent arms industry has complemented this military establishment. With this massive private industrial might symbiotically working with the government's military in times of war or peace, the U.S. government no longer needs to rely on a private sector conversion to military production every time war breaks out.

The pattern of U.S. military spending changed significantly in the middle of the 20th century. Prior to the Second World War, peacetime military spending as a percentage of gross domestic product (GDP) was generally less than 1 percent. During war it rose considerably--for WWI it rose to 7 percent--but still remained at fairly low levels. This all changed with the onset of WWII. From 1943 to 1945, annual military spending increased to more than 37 percent of GDP--the war dominated the economy. After the war there was a significant cutback in military spending to average levels of 5 percent of GDP. With the Korean War, these levels rose again to about 14 percent. They remained above 10 percent for the rest of the 1950s after the cessation of hostilities in Korea--peacetime military spending was at higher levels than earlier wartime levels. This maintaining of high levels of military spending--even during peacetime--marked the advent of the U.S. military-industrial complex of which President Eisenhower spoke.

These massive amounts of military spending fueled the private military-industrial sector. The federal government was now spending large amounts of money on arms production even in relatively peaceful times. Private entities, such as Lockheed Martin, Raytheon, and Northrop Grumman, were able to grow into large companies that were mostly dependent on government contracts for their survival. The relationship of these companies and the U.S. government is the essence of the military-industrial complex.

Since the 1950s, the ratio of U.S. military spending to GDP has declined considerably. During the Vietnam War this ratio was about 9 percent. Then in the 1970s it further declined to about 5 percent. President Ronald Reagan built it back up to about 6 percent in the 1980s, and then it fell to 3 percent by 2000. With the war in Iraq, it has inched back up to its current level of 4 percent.

Based on this more limited role that military spending now has in the United States, some argue that the military-industrial complex no longer exists. This would be an exaggeration. It is true that the military colossus is not quite what it was in the 1950s, but it is still a powerful presence in the U.S. and world economies. First, ratios of military spending to GDP at levels of 3-4 percent are still much higher than they were pre-World War II. Second, the absolute level of military spending is very high--the U.S. government spent more than $540 billion for national defense in 2006. Third, relative to the rest of the world, the United States spends far more on the military. The United States contributes more than half of the approximately $1 trillion spent worldwide annually on the military. In fact, the U.S. government's military budget is more than the next 14 countries combined-- it is nearly 7 times that of China, the second largest spender. Simply put, the United States still devotes an enormous amount of resources to military purposes; with arms being manufactured by private firms, the military-industrial complex remains a powerful force in the economy and society.

President Eisenhower, in his farewell address, argued that the military-industrial complex was absolutely essential for our country's welfare. With the sort of national rivalries that existed in the world, the United States needed to be instantly ready for war, in order to deter potential aggressors: a large and powerful arms industry would provide that readiness. The military-industrial complex is crucial to establishing national security in just such a world.

In addition to this national security argument, some economists argue that high levels of military spending are necessary to sustain capitalist economic growth. The phrase, "the permanent war economy," coined at the end of World War II by Charles Wilson (who later became Eisenhower's Secretary of Defense) in support of the military-industrial complex, is a phrase that describes this. The argument is that if the government does not continually maintain high expenditure levels, then a capitalist economy will fail to grow and will become mired in recessions or depressions. For Keynesians, the effects of military expenditures are like any other nonmilitary expenditures. An increase in any kind of government spending will increase economy-wide aggregate expenditures, thereby increasing GDP, resulting in a growing economy. As long as the government spends freely, the economy will thrive.

If the two forms of expenditures have equal economic effects, why has it been military spending driving the economy? Military spending has two advantages over social spending. One, it maintains the balance of forces between the capitalist and working classes--too much social spending may tip the balance in favor of the working class. And two, it seems much easier to garner political support for military spending than for social spending, at least in the United States.

The existence of the military-industrial complex raises concerns in three separate areas: the threat to liberty and democratic processes; the increased possibility of political and economic corruption; and its debilitating economic effects. President Eisenhower raised the first concern in his farewell address. When any governmental organization gets very large, the concern always exists that by acquiring undue powers unto itself it may limit individual freedoms. This becomes particularly acute if the organization is involved in national security--the Defense Department is naturally secretive and undemocratic and inherently restricts freedom of speech. This may then carry over into the private arms industry, further undermining democracy and freedom.

In any operation the size of the military establishment, waste, fraud, and mismanagement are practically inevitable. Some analysts even argue that because of the nature of the military, these concerns are greater than for the nonmilitary functions of the government. Whatever the case, there certainly is large-scale mismanagement on the part of the Pentagon. The General Accounting Office (GAO) has repeatedly stated that the Pentagon improperly accounts for billions of dollars in assets, consistently overpays for weapons systems, and makes erroneous and improper payments to its contractors in the arms industry. For example, the GAO reported that the Pentagon could not account for more than 20 percent of its $1.2 trillion worth of property and inventory in the 1990s.

The third concern regarding the military-industrial complex is economic. Opposing the Keynesian argument that high military spending is beneficial to the economy, some economists argue that military spending in fact represents severe opportunity costs. By choosing guns rather than butter, the economy is deprived of much useful social spending. For example, building a missile serves a useful purpose only if the country is at war. And even then, once it is used, it is gone and serves no lasting purpose--it is purely destructive in nature. Building infrastructure, such as bridges and roads, on the other hand, serves a lasting purpose and adds to the economy's use-values. The spending in either case--military or nonmilitary--may give an initial boost to the economy, but nonmilitary spending develops the economy, unlike military spending, which does nothing to enhance future economic output. These economists are essentially arguing that social spending is more economically useful than military spending.

Bibliography:

1) Eisenhower, Dwight D. 1961. "Farewell Address."

2) Galbraith, John Kenneth. 1967. The New Industrial State. Boston: Houghton Mifflin.

3) Melman, Seymour. 1970. Pentagon Capitalism: The Political Economy of War. New York: McGraw-Hill.

4) Melman, Seymour. 1985. The Permanent War Economy: American Capitalism in Decline. Rev. ed. New York: Simon & Schuster.

5) Schumpeter, Joseph. 1951. "The Sociology of Imperialism." In Imperialism and Social Classes, edited by P. Sweezy. New York: Augustus M. Kelley.

6) Sweezy, Paul. 1942. The Theory of Capitalist Development. New York: Monthly Review.

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