Thursday, November 12, 2009
Confirmed: Defense Spending Creates Fewer Jobs Than Other Types of Spending
Yesterday, I pointed out that a study by one of the leading economic modeling companies shows that military spending increases unemployment and decreases economic growth.
I have located a paper by economist Robert Pollin published in 2007 by The Political Economy Research Institute at the University of Massachusetts, Amherst - entitled "The U.S. Employment Effects of Military and Domestic Spending Priorities" - which concludes:
We present in Table 1 our estimate of the relative effects of spending $1 billion on alternative uses, including military spending, health care, education, mass transit, and construction for home weatherization and infrastructure repair."Military Keynesianism" - the idea that war is the best economic stimulus - is false.
[Click image for larger version]
The table first shows in column 1 the data on the total number of jobs created by $1 billion in spending for alternative end uses. As we see, defense spending creates 8,555 total jobs with $1 billion in spending. This is the fewest number of jobs of any of the alternative uses that we present. Thus, personal consumption generates 10,779 jobs, 26.2 percent more than defense, health care generates 12,883 jobs, education generates 17,687, mass transit is at 19,795, and construction for weatherization/infrastructure is 12,804. From this list we see that with two of the categories, education and mass transit, the total number of jobs created with $1 billion in spending is more than twice as many as with defense.
Update: Pollin published an updated version of his paper on October 20, 2009. The abstract summarizes their updated findings:
The authors compare the effects of a $1 billion military investment military and the same investment in clean energy, health care, education, or individual tax cuts. They show that non-military investments create a much larger number of jobs across all pay ranges. With a large share of the federal budget at stake, Pollin and Garrett-Peltier make a strong case that non-military spending priorities can create significantly greater opportunities for decent employment throughout the U.S. economy than spending the same amount of funds with the military.And here are a chart and table from the updated study:
6 comments:
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Hi Georg!
ReplyDeleteThe question as to how many jobs are created by different forms of spending is meaningless and irrelevant, and for the following reasons.
ReplyDeleteThere is only ONE ultimate cost: a labor. To illustrate, the cost of any product is made up of labor, machinery, materials, etc. But the latter machinery and material costs themselves s break down into - yes, you guessed it - labor, machinery, materials, etc. Work your way back far enough and there is only one cost: labor.
Thus there is a strong case for saying that it makes no difference how you spend $X - the number of jobs created will ultimately be the same.
But even if the number of jobs are NOT the same the "jobs per $" argument is still irrelevant. This is beacause inflation only becomes a problem when unemployed has dropped far enough (to NAIRU to use the technical acronym).
I.e. if a particular form of spending does NOT create many jobs, then it is not inflationary, which in turn means the government or FED can just print more dollars and spend them so as to create more jobs.
(Technical note: it is widely recognised in economics that GDP can be broken down into three elements: labor, interest and profits. In saying above that there is only one ultimate cost, labor, I am stretching the meaning of the word. I.e. I'm using it to include the "labour" of entrepreneurs and money lenders. But this does not materially weaken my above point.)
Defense gives you a multiplier of 1 for every buck you put in you get 1 buck of bang , but the jobs you get from defense spending create better paying jobs than most other spending. In this day and age that is important , too. However I'd rather see those billions spent of energy related jobs.
ReplyDeleteDefense spending is a poor way to create jobs because the production is not of much value. We already spend several times more on defense than all our potential adversaries combined. Getting an additional $1 Billion in tanks or guns or whatever doesn't make us marginally more secure at all. In fact, we could cut defense spending in half and we would be just as secure as we are now. On the other hand, if we invested in green energy and a hydrogen economy here at home with that saved half of our defense budget, very soon we would be energy independent. If the US was energy independent, we would not need such a large military in the first place
ReplyDeleteAll of you may be correct. But that's not the cultural purpose of war spending. To the tribal "conservative", all institutions in society, church, state and private property, must support the perpetuation of the tribe, meaning a system of organized conformity impressed on each generation. The good tribesmen must be rewarded by all institutions, the aberrant and radical tribesmen must be punished. Even the free market must be overridden if it interferes with this sacred mission, though that rarely happens in practice. War, in a sense, begins at home, the value of war itself to intimidate reformers into silence, to elevate men even further over women, to prize the ruling elites who supply a monopoly of military leadership and weaponry and thus deserve their privileges.
ReplyDeleteWar spending rewards violence and paranoia, racism, religious bigotry, economic expansion thru invasion, regimentation, manual labor and mindless obediance. All good tribal values.
Welfare spending and education rewards inquiry, dissent, diversity, and insolence against traditional authority. Very modern values that threaten the identity of many Americans and their entire reason for being.
And that is why many Americans would literally spend every cent in the country to buy useless weapons from "patriotic" businessmen and arm bullies, rather than let that money feed or employ a single person who is different than themselves. The businessmen easily expoit this sentiment to lobby for the Pentagon budget that suits their real purposes.
How do we make the numbers of an objective study matter more to a nation of idiots than their prideful sense of entitlement to a teat on the great war pig?
Please note: It is NOT true that labor is
ReplyDeletethe only cost, and that materials costs
are equal across spending sectors. The
material cost of defense spending is significantly higher than for other sectors
due to purchasing contracts: military specs
are frequently tailored to vendors' specific
products, from Scotch-brand tape to the infamous
$600 hammers.
And on military installations throughout the
country, there has been a practice of corrupt
symbiosis between those purchasing goods and
those selling them. A military buyer is induced
to replace reparable items with new ones. The
buyer then gets part of the profit as a kickback. This is certainly no "labor cost,"
but a cost nonetheless.