SV: [OPE] Studying unproductive labor: CEPR report

From: Martin Kragh (
Date: Wed Feb 27 2008 - 13:38:18 EST

I think the experience of World War II shows that countries that entered the war with high unemployment rates actually experienced positive growth rates for the years 1940-1950. At least this is true for the US and most Western economies. For Germany, France, Finland and the USSR, the war was a major setback, but these were also countries where a lot of actual destruction and fighting occurred (one might also argue, that it was the countries who won the war that also experienced positive growth, of course the USSR also "won", but it was extremely pyrrhic, the losses they experienced are incomprehensible to the human mind). 

There is no clear cut way to say whether or not military spending might act as a positive multiplier or not in the short vs. the long run. It depends on the initial circumstances, and the conditions in which the spending develops. In peace time, it is another thing again. Economic historian Mark Harrison argues that it is not completely easy to determine whether or not Soviet military spending during the Cold War constituted a net drain or not, since it is not easy do determine the interrelatedness of military spending and innovations, and the potential boost these might produce for the civilian sector. Still however, many historians love to preach that the USSR was "outdone" in the arms race with the US. However, this might not be the (main) reason the Soviet economy came to a naught in 1985.

Just some thoughts.

Kind regards,


-----Ursprungligt meddelande-----
Från: [] För Dave Zachariah
Skickat: den 27 februari 2008 15:51
Till: Outline on Political Economy mailing list
Ämne: Re: [OPE] Studying unproductive labor: CEPR report

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
> ------------------------------------------------------------------------
> _______________________________________________
> ope mailing list

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