Re: [OPE] Studying unproductive labor: CEPR report

From: Dave Zachariah (
Date: Wed Feb 27 2008 - 09:50:54 EST

Hi Jerry,

I don't agree with their analysis, but I think it is interesting that 
they reach a similar conclusion. In the short run military spending 
raises demand. But it drains investment in the productive sectors, 
reducing the growth of productive capacity of the economy which 
determines the long-run development of output and the material living 
standard. Moreover, increased arms spending means that more surplus 
labour must be pumped out of the workers in the rest of the economy.

//Dave Z

> > The Economic Impact of the Iraq War and Higher Military Spending
> > May 2007, Dean Baker
> >
> > Quote:
> > "Military spending drains resources from the productive economy. For
> > this reason, it will typically lead to slower economic growth, less
> > investment, higher trade deficits, and fewer jobs."
> Hi Dave Z:
> The same argument could be extended to the
> consequences of just about any increase in government spending.
> What is curious here is the apparent lack of recognition that
> increased government spending, including increased spending
> on the military, can increase employment, income, and
> spending in the macro economy.  It's almost as if he is making
> a pre-Keynesian claim and thereby failing to recognize the
> role that fiscal policy (not to mention the "multiplier") can
> play in short-run macroeconomic activity.
> In solidarity, Jerry
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