Economic consequences of armaments production: institutional perspectives of J.K. Galbraith and T.B. Veblen

Journal of Economic Issues, March, 2008 by James M. Cypher

Galbraith, virtually alone, deeply believed that the military-industrial complex was not a structural necessity of the postwar economic growth and stabilization strategy. Private luxury and public squalor constituted the underlying paradox of the age--government intervention to provide desperately needed public goods would answer the Keynesian need for an activist public sector. But he did see that military outlays were uniquely capable of boosting technological advancement for the private sector (Galbraith [1967] 1985, 239-241,350). Nationalize the defense firms, exercise social control over the Pentagon bureaucracy and engage in respectful and meaningful dialogue with the USSR--this was Galbraith's formulation. Paradoxically, recognizing that Galbraith was incorrect in arguing that the military (and not the private contractors) dominates the weapons acquisition/maintenance process only strengthens his case for nationalization. If armaments production was undertaken by public arsenal firms this would eliminate the "follow-on" imperative whereby armaments producers constantly seek to create a new market through marginal or cosmetic changes in their product. As such, the wellspring of the arms race would be closed off.

Veblen, on the other hand, had a deep and abiding respect for the social structures of mature capitalism. The institutions built to serve the interests of the absentee owners (particularly the Captains of Industry) were not easily tilted, no matter the logic of the case presented by social critics. To a Veblenian, Galbraith's tireless critique of the Military Keynesians, while resting on solid grounds of logic, was Quixotic.

Veblen's basic view of military expenditures was that they constituted an overwhelmingly negative intrusion of retrograde, revanchist elements that should have died-out with the terminal stages of "dynastic" societies. Veblen suffered the effects of his dichotomous manner of analysis--militarism was backward, encouraging patriotism, which was based in subordination and the glorification of martial characteristics. Militarism was the obverse of industrial, technological pursuits that formed the basis for modernity. Yet, as has been stressed, Veblen took a different tact at one point, allowing that "waste" could be quite beneficial, at least in the short run, as a generator of employment and general economic prosperity.

The missing link in all of this is technology. Veblen, surprisingly, did not seem to have linked military expenditures with the advance of technological innovation. Throughout much of the 19th century, technological advances were spun off from U.S. investments in the armory system where interchangeable parts sparked waves of innovation that eventually ended in Fordism (Ruttan 2006, 21-32). As a dichotomous thinker Veblen was determined to show that military spending gives rise to the predatory animus. But, state-sector expenditures on technological innovations also form the basis for important and sometimes revolutionary surges in technological innovation, underwriting long-waves of accumulation (Cypher 1987). Galbraith rightly insisted that the State underwrote technological developments through arms spending, but he did not sufficiently emphasize spin off effects from military technologies. In the final analysis the trick, apparently, is to understand the potential dual dimensions of institutions--their retarding or retrograde aspects and their functional elements (Waller 1994, 369).