The Economic Cost of the Military Industrial Complex

by James Quinn, originally posted at Seeking Alpha

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 not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hope of its children."

These must be the words of some liberal Democratic Senator running for President in 2008. But no, these are the words of Republican President Dwight D. Eisenhower, the Supreme Allied Commander during World War II, five decades ago.

The United States, the only superpower remaining on earth, currently spends more on military than the next 45 highest spending countries in the world combined. The U.S. accounts for 48% of the world’s total military spending. Where did the peace dividend from winning the Cold War go?



The United States spends on its military 5.8 times more than China, 10.2 times more than Russia, and 98.6 times more than Iran. The Cold War has been over for 20 years, but we are spending like World War III is on the near term horizon. There is no country on earth that can challenge the U.S. militarily.

So, why are we spending like we are preparing for a major conflict? The impression on the rest of the world is that we have aggressive intentions. The administration is posturing like Iran is a threat to our security. Iran spends $7.2 billion annually on their military. We could make a parking lot out of their cities in any conflict. Does anyone really believe that they would create a nuclear weapon and use it on Israel? Their country would be obliterated.

Defense spending had peaked at just under $500 billion in 1988. The fall of communist Russia did result in a decline to the $350 billion range from 1995 through 2000, and an economic boom ensued. Since 9/11 we have doubled our spending on defense.

This seems like an overly extreme reaction to 19 terrorists attacking our country. Bin Laden and his terrorist network numbered less than 10,000. The initial response of invading Afghanistan, defeating the Taliban, and cornering bin Laden in the mountains was supported by the entire world. The success of this response was sufficient to deter any other country from allowing terrorist organizations to operate freely within their borders.

The natural response of the United States should have been to increase spending on border protection, upgrading the CIA, and increasing our ability to gather intelligence. Instead, we spent billions on weapons, aircraft, tanks, and missiles. The neo-cons, led by Cheney, Rumsfeld, and Wolfowitz, saw the 9/11 attack as their opportunity to change the world. They’ve gotten their wish.

Of course, we took our eye off of bin Laden and Afghanistan. The Taliban has experienced a resurgence, recently freeing 800 fighters from a prison. Bin Laden continues to issue videotapes exhorting his followers to continue the fight.


Dwight D. Eisenhower’s farewell speech in January 1961 is a brilliantly perceptive analysis of the future of our country.

Throughout America's adventure in free government, our basic purposes have been to keep the peace; to foster progress in human achievement, and to enhance liberty, dignity and integrity among people and among nations. To strive for less would be unworthy of a free and religious people. Any failure traceable to arrogance or our lack of comprehension or readiness to sacrifice would inflict upon us grievous hurt both at home and abroad.

This last sentence describes what George Bush has managed to do in the last 5 years. The arrogance of believing that we could invade a country on the other side of the world and expect to be treated as liberators is beyond comprehension. Our reputation abroad has been grievously damaged. The voluntary sacrifices we’ve made in the U.S. were to receive tax cuts and multiple tax rebates, paid for by our grandchildren. President Bush has sacrificed by not playing golf for the last 5 years.

How noble. Not exactly the Greatest Generation, quite yet.

Did President Eisenhower envision that the U.S. would have troops stationed in 70% of the world’s countries? According to the Defense Department’s latest "Personnel Strengths" report, the United States now has troops stationed in 147 countries and 10 territories. This is the greatest number of countries that the United States has ever had troops in. Why are we policing the world? What is the point of having 57,000 troops in Germany and 33,000 troops in Japan? Germany and Japan each spend $40 billion per year on their military. Can’t they defend themselves at this point? We defeated them 60 years ago. It is time to leave. This is a prelude to decades of occupation in Iraq. Don’t believe the blather about withdrawal. The military has no intention of withdrawing.



It is a shame that after 9/11, George Bush didn’t read President Eisenhower’s farewell speech. I wonder if he has ever read the speech. Instead he chose to follow the “wisdom” of Dick Cheney, Donald Rumsfeld, and Paul Wolfowitz. President Eisenhower’s words describe the crisis that occurred on September 11, 2001.

Crises there will continue to be. In meeting them, whether foreign or domestic, great or small, there is a recurring temptation to feel that some spectacular and costly action could become the miraculous solution to all current difficulties. A huge increase in newer elements of our defense; development of unrealistic programs to cure every ill in agriculture; a dramatic expansion in basic and applied research -- these and many other possibilities, each possibly promising in itself, may be suggested as the only way to the road we wish to travel.

A spectacular and costly response is what the Iraq invasion has turned out to be. We have now spent more money on this venture than any war in history except for World War II. And there is no end in sight.



I live in Pennsylvania. Taxpayers in Pennsylvania have paid $20 billion for our share of the Iraq war, so far. This amount of money would pay for 1,650,000 scholarships for University students for one year. Does a $20 billion investment in rebuilding Iraqi bridges that we blew up with $1 million cruise missiles make more sense than investing in our best and brightest young people? $20 billion would provide 24,000,000 homes with renewable electricity for one year. That is 20% of all the homes in the United States.

After paying their utility bills this coming winter, I think I know what the majority of Americans would choose. Some further perspective on this out of control spending is provided in the following chart:



President Eisenhower, as a former commanding general of Allied forces in World War II, knew exactly what the implications of having a permanent armaments industry were to the United States. He was also worried about the implications.

Until the latest of our world conflicts, the United States had no armaments industry. American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security more than the net income of all United States corporations.

These words were spoken 5 decades ago, but are just as true today.

President Eisenhower, as a former commanding general of Allied forces in World War II, knew exactly what the implications of having a permanent armaments industry were to the United States. He was also worried about the implications. These words were spoken 5 decades ago, but are just as true today.



The top five U.S. defense contractors generated almost $129 billion in revenues and $8 billion in profits in 2006, double the revenue and profits in 2000 when George Bush became President. The War on Terror has been a windfall for the defense industry and their shareholders. These companies have intertwined themselves into the fabric of our government and defense department. They contribute tremendous amounts of money to Congressional candidates and have thousands of lobbyists pushing for more defense contracts. Many politicians end up working for defense contractors (i.e. Dick Cheney) after they leave public service. This leads to conflicts of interest negatively impacting the American public.



It appears that the biggest winners of the War on Terror are the CEOs of the defense contractors. I wonder if they realized how rich they would become as they watched the Twin Towers crumble to the ground. They have virtually tripled their annual income, while the average American scratched out a 20% increase over 6 years. They have managed to generate the tremendous profits and personal wealth while only employing 10% more employees. Boeing and Raytheon were actually able to reduce their workforce. How productive. These contractors will do everything in their power to retain and increase these fabulous profits.

President Eisenhower clearly understood the moral implications of a huge armaments industry and the costs to a free society.

This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence -- economic, political, even spiritual -- is felt in every city, every State house, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.

We have some of the brightest engineers in the country developing weapons to kill human beings more efficiently. There is an opportunity cost that is being paid. These engineers could be concentrating their brilliance on developing alternative energy solutions which could free us from our drug dependence on the Middle East. Which effort would benefit our country more, weapons development or energy independence?

President Eisenhower’s final words are the most chilling.

In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

We did not heed his wisdom. Laurence Vance, author of What’s Wrong with the U.S. Global Empire?,contends that our foreign policy

is not right, it’s unnatural, it’s very expensive, it’s against the principles of the Founding Fathers, it fosters undesirable activity, it increases hatred of Americans, it perverts the purpose of the military, it increases the size and scope of the government, it makes countries dependent on the presence of the U.S. military, and finally, because the United States is not the world’s policeman.

War and non-stop conflict benefit the military industrial complex. It is in their best interest for them to support candidates that favor an aggressive foreign policy. This could lead to Defense companies using their influence to provoke conflict throughout the world.

In conclusion, I again turn to the wisdom of Ron Paul, the only presidential candidate speaking the truth to the American public. In a speech before Congress several months before the Iraq invasion, his words were reminiscent of President Eisenhower’s.

The basic moral principle underpinning a non-interventionist foreign policy is that of rejecting the initiation of force against others. It is based on non-violence and friendship unless attacked, self-determination, and self-defense while avoiding confrontation, even when we disagree with the way other countries run their affairs. It simply means that we should mind our own business and not be influenced by special interests that have an ax to grind or benefits to gain by controlling our foreign policy. Manipulating our country into conflicts that are none of our business and unrelated to national security provides no benefits to us, while exposing us to great risks financially and militarily.

If we followed a constitutional policy of non-intervention, we would never have to entertain the aggressive notion of preemptive war based on speculation of what a country might do at some future date. Political pressure by other countries to alter our foreign policy for their benefit would never be a consideration. Commercial interests and our citizens investing overseas could not expect our armies to follow them and protect their profits.

If as a country we continue to allow our politicians and their military industrial complex corporate sponsors to spend $700+ billion per year on weapons, to the detriment of higher education, alternative energy projects, and national infrastructure needs, we will be paying an extremely high price.

We are in a classic guns or butter scenario. The Bush Administration has decided to choose guns while borrowing from our grandchildren and the Chinese to pay for the butter. This can work for awhile, but as deficits accumulate, the dollar plummets, and inflation rears its ugly head, our great country will decline as other empires who overstepped their bounds declined.

Disclosure: Author holds no positions in the stocks mentioned above