Newspaper article The Christian Science Monitor

US Economy Can Survive a War with Iraq - If War Is Necessary

Newspaper article The Christian Science Monitor

US Economy Can Survive a War with Iraq - If War Is Necessary

Article excerpt

The growing debate on a possible major military engagement against Iraq is a propitious time to examine what we know about the impact of military activity on the American economy. To begin with, it is necessary to discard notions based on World War II experience. That was literally a different age, and few "lessons" from that era apply to our current situation.

At the start of World War II, the United States had a very small and inadequate military establishment and its defense industrial base was of similarly modest size. Before the nation could engage in major hostilities, it was necessary to invest in the creation of a new defense production industry and to manufacture a wide array of armaments for a massive military force that was being developed. That burst of military demand - which was sustained until the end of World War II - was a key factor in ending the prolonged depression of the 1930s.

Turning to the period following the end of the cold war, it's clear that the substantial reduction in military spending - the procurement of weapon systems was reduced by approximately one-half from the peak achieved in the mid-1980s - did not interfere with a prolonged boom. In fact, the shift from military to civilian priorities contributed to the strength and duration of the economic upturn of the 1990s.

On reflection, that should not be too surprising. Producing armaments may have an initial positive effect on the levels of production, employment, and income - when the overall economy contains some slack in terms of underutilized resources.

But the economic productivity of defense production is very limited when compared with civilian production. In the civilian sector, the production of "durable" or "capital" goods usually generates a future stream of benefits to the American consumer when those capital goods are used to produce a flow of additional products and services.

In striking contrast, the use of those military capital goods - such as aircraft, missiles, tanks, and other ordnance - may generate important but far less tangible benefits to society. …

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