Capitalism and Militarism

James Devine,

Professor of Economics,

Loyola Marymount University





If you can’t see the picture, replace “%5C” in the web address with “/” (without the quote-marks, naturally).

a talk given at Woodbury University (Burbank, CA) on April 27, 2003

(notes revised a bit since then)

I. Introduction. I’m going to talk about “capitalism and militarism” rather than simply military spending.

II. What is Militarism?

A. Militarism refers to excessive military spending, going beyond mere defense. It also refers to attacks on other countries, aggressive wars. It is not the same as “imperialism,” a completely different topic.

B. The hand-out by Seymour Melman shows the meaning of militarism in the United States: we are sacrificing all sorts of important civilian goals in order to pay for the military. (See and click on “Looting Our Cities: The tradeoffs of military spending.”)

C. I believe that the recent unprovoked attack on Iraq was a clear example of militarism. On the other hand, I don’t see the U.S. role in World War II as involving militarism in any major way except as a defense against militarism.

III. Themes and Conclusion.

A. The great conservative economist Joseph Schumpeter argued that militarism and imperialism were atavisms, left over from old-fashioned, backward, systems such as feudalism, in which military might and experience were central to social advancement of individuals and to maintaining the social order.

B. He had a point. But this poses the question: why does militarism persist even in the richest and most capitalist countries in the world, such as the United States?

C. To give you an idea of my conclusion: yes, there is a strong positive connection between capitalism and militarism, but that doesn’t mean that capitalism has to imply militarism.

IV. What is Capitalism?

A. It’s an economy in which the major productive resources beyond labor – i.e., the means of production – are owned by a small minority of the population, giving them control over the system.

B. This small minority dominates politics, putting a major emphasis on the preservation and extension of their property rights and power – even at the expense of others’ property or at the expense of collective (public) property.

C. It’s more than an economy in which markets and exchange dominate economic relations between people.

1) It’s an economy in which competition for profits – the profit motive – is the driving force. The big profits that excite and motivate capitalists do not come from “normal” trade (selling products that people want), but from expansion, innovation, fraud, lawsuits, lobbying, and the like.

2) Capitalists “grow their businesses” to gain profits and survive the battle of competition, while “plowing their profits back into the business” to expand. They expand to compete and compete to expand – often in fear of losing the battle, shrinking, and going bankrupt. 

3) Competition typically encourages mergers and acquisitions which allow (temporary or long-lasting) monopoly power. One of the best ways to promote profits is try to gain a monopoly position. It’s also necessary to fight to maintain existing monopoly positions (by lobbying, lawsuits, etc.) Getting the government to provide monopoly privileges is often the most successful way to survive.

4) As a result of this competitive expansion, capitalism is a dynamic system, that keeps on changing, disrupting individual lives, families, and communities, creating social problems.

5) This dynamism even undermines the capitalists’ own status quo, so that they have to keep struggling to grab or protect monopoly positions. (Some businesses get fat and lazy in monopoly positions and thus end up failing to keep up with the technological and societal trends – and losing their positions.)

V. How Capitalism Encourages Militarism. There are several levels here. In reality, they interact and often reinforce each other.

A. (simple profit-seeking) Individual capitalists expand internationally, trying to profit by controlling natural resources (oil!), markets for products, access to cheap labor, contracts to build or fix infrastructure (Bechtel!), etc. They strive to get government-guaranteed monopolies that preserve high profits.

1) Expanding internationally is one major way to compete.

2) Having a government that has a strong international position allows monopolization efforts to prevail. For example, international propagation of the U.S. system of “intellectual property rights,” keep medicines at really high prices even if it leads to deaths of people who can’t afford them.

3) Other forces profit mightily from government military contracts (the military-industrial complex).

4) Coalitions favoring militarism can be formed, as with the military-industrial complex’s current alliance with the oil industry.

5) Capitalist politics typically works following pressure from such coalitions of the powerful. (It wasn’t a single industry – such as the oil interests – that was behind the recent war against Iraq. Forces also included the pro-Israel bloc, fundamentalist Christians, etc.) These forces represent a major political force driving the government to back up their claims, encouraging militarism.

B. (Macroeconomic) In recent decades, the U.S. and the entire world has seen a chronic problem of insufficient demand and idle capacity, hurting profits. Similar problems were seen before World War I and in the period between the World Wars. This kind of demand problem led to the Great Depression of the 1930s.

1) Disaster and depression aren’t inevitable, however. The “pump” can be primed.

2) Spending on infrastructure, public health, the welfare state (health, education, etc.) or for raising wages and salaries could (in theory) solve the problem, but

3) among the powerful militarist bloc, military spending and war represent politically correct substitutes for these in boosting the economy. They oppose civilian spending unless it’s obviously profitable for them. Civilian programs often compete with private enterprise, so unless they are handed over to business (“privatized”) they attract antagonism from business interests.

4) One of the major reasons for prosperity during the 1950s & 1960s was warfare state spending, which acted as a “balance wheel” on the economy, moderating its fluctuations. (Unlike in Western Europe, the welfare state was relatively small in the U.S. during the 1950s and 1960s and has shrunk drastically since then.)

C. (societal effects) Militarism and war

1) represent major social forces for papering over conflicts and social problems within a nation, unifying around the flag. Nationalism – or “patriotism” to its friends – avoids a lot of the sticky political problems, such as dealing with the steady increase in societal inequality during the last 30 years or so.

2) are linked to so-called “traditional” values, as in the extreme case where the Nazis pushing of kinder-küche-kirche. In the U.S., we see a more moderate push to return to the “traditional values” of the 1950s. This includes people such as Attorney General John Ashcroft who see punitive solutions to all problems, minimize the need to protect civil liberties, and try to break down the division between Church and State.

3) provide an outlet for advancement to those workers who are left behind in slums and other areas, with inadequate jobs. As the famous late 19th century imperialist Cecil Rhodes noted, militarism can be a solution to the “social problem.”

D. (international competition) The competition among capitalist nation-states is encouraged by the competition among capitalists from various nations to attain or protect monopoly positions. Militarism of one country is then encouraged by that of another, as seen in arms races, the effort to grab territory for strategic reasons, etc. This often means that there’s no obvious economic reason for a militaristic adventure.

1) this was a major reason for the competitive militarism that encouraged the tensions that caused World War I.

2) it also encouraged World War II, for similar reasons, in addition to encouraging the “trade wars” (aggressive protectionism in foreign trade) that encouraged the Great Depression of the 1930s.

3) competition with the U.S.S.R., a non-capitalist but still militarist country, had a similar effect from 1945 until 1989 or so.

E. (hegemonism) These days, the militarism of the U.S. government does not seem to be responding to competition of these sorts.

1) Iraq was never a threat to the U.S., while containment could have worked. (In fact, it must have, since Iraq never used its non-conventional (biological and chemical) weapons. It either destroyed them completely or hid them away so much that they were useless militarily.)

2)  Most “third world” countries aren’t competitors for the capitalists of the U.S. and other dominant capitalist countries. Instead, they represent possible places for profitable investment. Many businesses want to invest in cheap labor-based enterprises, real estate, banking, natural resources, and the like.

3) Europe and Japan are hardly military or economic threats to the U.S. these days.

4) We see a “uni-polar” world, with a single super-power.

F. If the nation-vs.-nation story isn’t working, something else is going on.

1) Obviously, there are private benefits to powerful companies and individuals and coalitions, as noted above. Dominating recalcitrant countries in what used to be called “the third world” can guarantee profits and monopoly.

(a) For example, the U.S.-backed International Monetary Fund has pushed and shoved South Korea to open its markets to U.S. investment, even though (or even because) it stimulated a financial crisis (in 1997) that allowed U.S. businesses to buy up key elements of the Korean economy at rock-bottom “fire sale” prices.

2) A key problem is that the growing world economy – often called globalization – needs a world government, to maintain order, avoiding conflicts between nations and preventing non-governmental violence (sometimes called “terrorism”).

3) The powerful companies, individuals, and coalitions in the U.S. don’t see the United Nations and similar multilateral institutions as adequate. It isn’t seen as serving their interest.

4) There’s no force such as the U.S.S.R. that will keep the U.S. in check (the way the U.S. kept the U.S.S.R. in check and vice-versa during the Cold War).

5) The U.S. is trying to establish a world government that’s “under its thumb,” perhaps incorporating the U.N. as a subordinate institution. The U.S. government seems to be striving for what some of their theorists call “full spectrum dominance,” where there is no possible opposition. A U.S.-dominated world government would be highly profitable to the dominant political bloc.

VI. But Capitalism Doesn’t Always Involve Militarism.

A. Examples of Capitalist non-Militarism.

1) Sweden: the welfare state.

2) Costa Rica, until the U.S. encouraged it to set up a military.

3) Germany or Japan, both of which have been very pacifist since World War II. However, they both profited from U.S. militarism during the Cold War.

4) The European Union, which lacks the unity sufficient to engage in wars and the like.

B. Why? There are lots of historically-specific reasons. But there are also some general reasons:

1) There are some businesses that do not profit much if at all from militarism or see the possible long-term downside of militarism. They prefer multilateral solutions, efforts to use diplomacy and the like.

2) Military spending is usually not a very efficient way of helping the supply side of the economy grow. (It “primes the pump,” but isn’t very good at improving the quality of the pump.) There are technical spin-offs from military spending but they are

(a) expensive, due to the high costs encouraged by the military-industrial complex (gold-plated toilet seats, etc.); and

(b) sometimes very hard to “capture” for the country, as when Japan took advantage of the military-inspired advances in electronics.

(c) sometimes very hard to “capture” by politically-influential business interests, as when small “upstart” companies such as Intel and Microsoft took advantage of new computer technologies (encouraged by military spending). (These upstarts are now big companies, but aren’t really part of the in-crowd of the current version of crony capitalism.) 

(d) Thus, after World War II until the 1990s, non-militarist countries such as Germany and Japan were able to win in the competitive battle with the U.S. Similarly, old companies (IBM, Xerox, Polaroid, etc.) found themselves falling in competition.

3) Workers and other people (including small business-owners) who pay the taxes, suffer from inadequate public services, die in war, etc.

4) Other forces, such as well-intentioned liberals and religious groups. (It ain’t all economics.)

5) These can form an international movement, as with opposition to Operation Iraqi Liberation. The people of Turkey and France, for example, were successful in getting their countries’ governments to oppose the war in very concrete ways.

6) Thus, the limited inter-country rivalry these days may mean that there’s an opportunity to create a non-militarist and multilateral solution to the world’s problems. In theory, at least, a super-power can use its power for evil, but it can also use it for good.

VII. Can Capitalism Co-Exist with an end to Militarism?

A. It would be useful to do an experiment and see the answer to this question. Let’s try to set up a non-militarist society.