Dwight Eisenhower was no economist, but he understood basic economic concepts.
In a 1953 speech, just three months after taking office as president, and three days after the death of Joseph Stalin, Eisenhower argued that “Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.”
He also described how the resources spent on new planes and ships compared to the number of schools and hospitals that might have been built for the same cost. That all was a clear expression of the economic idea “opportunity cost” — the question of what one must give up in choosing to pursue any given alternative. This is the foundation on which all of economics rests.
Eight years later, just before leaving office, Ike returned to this theme in his “military-industrial complex” speech, fretting about what the nation was sacrificing because of resources devoted to defense and the Cold War. (The speech was drafted by Malcolm Moos, later president of the University of Minnesota.) Eisenhower’s concerns were not merely over wasted resources, but also over the twisting of societal values because of a large defense establishment and the undue influence of corporations and research institutions on politics and society.
I’m writing this on Veteran’s Day. Reflecting on my own 29 years of service, three on active duty and 26 in the reserves, I largely think the old general not only was right, but prescient, about a world in which the “war on terror” threatens fundamental citizen rights. But was Ike entirely correct in dwelling on defense spending’s costs to society to the near exclusion of its benefits?
The tremendous levels of human and physical resources we have plowed into defense over the past 70 years certainly reduced our production of other goods and services to meet people’s needs.
But there were benefits, including some we seldom recognize.
Human beings are the most important economic resource to any economy. War was once a very labor-intensive enterprise. Nearly 16 million American served in uniform during World War II, with a high of more than 13 million at any one time. That was 9 percent of the population. It was still 1.8 percent when I was on active duty in the late 1960s. Now it is under 0.5 percent, the lowest level since 1940.
How, for example, would the U.S. economy have been different in 1970 if there had been only 1.4 million in uniform, today’s level, instead of the 3.5 million serving then?
That is hard to answer. There certainly would have been more people available to work producing civilian goods and services.
First of all, labor of civilians already producing military goods used by the “extra” 2.1 million then in uniform could have gone for consumer or business goods. And 2.1 million bodies and minds potentially would have been available for the same end.
Just what that would have done to labor statistics is not clear. Job numbers, the labor force, unemployment rate and other indicators are all tabulated around the “civilian, non-institutionalized population age 16 and over.”
So 2.1 million military could have been shifted to this population, increasing it by 1.5 percent. The question is whether the same number would have been added to the labor force and to the number of jobs.
Some people would have gone to postsecondary schooling. Those who did so without getting even a part-time job would have been “out of the labor force” completely.
But because they were mostly male and the male “labor force participation rate” then was higher than for females, this indicator for the overall population would have increased.
What this would have done to unemployment rates depends on an assumption about how many of these predominantly young men would have gotten jobs.
At that time, unemployment rates for males ages 16-24 were more than twice as high as the general populace.
So moving 1.5 million predominantly young men back to civilian life probably would have raised the unemployment rate a tad.
Over time, a somewhat higher unemployment rate tends to foster somewhat lower growth in real wages.
This effect would have been particularly harsh for African-Americans, who served in the military roughly in proportion to their portion of the total population, but who had a civilian unemployment rate for young males several times as high as for whites.
If voluntary enlistments and involuntary conscription had not put many young blacks into military service back then, many would have been unemployed.
That is part of a broader phenomenon of military service functioning as a socioeconomic escalator for blacks and other minorities.
A former military colleague of mine, an African-American senior NCO, frequently said, “Harry Truman (who desegregated the armed forces) and the draft did more for the black middle class than all white liberals and anti-poverty programs put together.”
He was probably right. In the first decades after World War II, military service, even if involuntary, gave blacks an opportunity for vocational education, establishment of a work record and GI Bill-subsidized civilian education that they would not have had if military numbers had been much lower.
That was true for Hispanics and many whites also. In the 1950s and 1960s, the military constituted the largest vocational training entity in U.S. society. Millions got training in mechanics, electronics, cooking, medicine, construction and other trades. A discharge certificate indicating such training gave many people, especially from poor backgrounds, entry into careers that they never might have had otherwise.
So although some of the productive labor taken up by a large standing military during the Cold War was expended on socially useless activities such as painting rocks around orderly rooms, there were positive spillovers in terms of youth employment and education.
Then there are the questions of whether total output and productivity of the U.S. economy would have grown as fast as it did if we had not spent so much on defense. That was an implicit assumption of Eisenhower’s speeches. Perhaps it would have. But there are several reasons why growth might have been slower. These must wait for another column.