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Who’s Afraid of the Military-Industrial Complex?

The economic importance of the arms industry is exaggerated.

Words: William D. Hartung
Pictures: US Department of Defense

On September 22, the New York Times published a piece by veteran economic analyst and former Times columnist Louis Uchitelle entitled “America still leans on the military-industrial complex.” Uchitelle made a few useful points, but he vastly overstated the dependence of the US economy on Pentagon spending.

The United States still spends immense sums on the Pentagon – close to $700 billion this year if Congress has its way.  But as the rest of the economy has grown, the importance of Pentagon spending has diminished, to the point where it is well under 4 percent of our Gross Domestic Product. Even allowing for the ripple effect of these expenditures — for example, when dollars spent by workers in the defense sector support local merchants — well over 90 percent of our economy has nothing to do with military spending.

Uchitelle suggests that the greatest area of dependency on weapons procurement is in the manufacturing sector, where he suggests that up to 10 percent of all activity is related to arms outlays. But he measures dependency based on value added. He should look at employment instead. Research by economists at the University of Massachusetts has demonstrated that Pentagon spending is the least effective way to create jobs. Investments in alternative energy, infrastructure, or other sectors that involve manufacturing would have a far greater impact.

It should come as no surprise that weapons contractors routinely overstate the employment impact of their activities to curry favor with lawmakers and the public as a way to keep the Pentagon gravy train running full speed ahead. A case in point is Lockheed Martin, which claims that its F-35 combat aircraft program creates 125,000 jobs in 46 states. When I took a closer look at the numbers – and Lockheed Martin’s flawed methodology – it ended up that the true jobs impact was only about half of what they claimed. And more than half of the jobs are based in just two states – Texas and California. In short, there are fewer jobs in fewer places than the company suggests. So the F-35 is still a force to be reckoned with in terms of the ability to parlay jobs tied to the program into political influence, but it is not the unbeatable juggernaut that the company’s skewed estimates would suggest.

The real driving force behind persistently high weapons spending is politics – pressure from representatives of the minority of communities and states that have substantial economic dependency on arms outlays. There’s no question that defense jobs are a major factor in the economies of Missouri, southern California, Connecticut and a half dozen or more other states, but in a majority of states and localities defense is a modest contributor to jobs and economic growth. Shifting away from dependency on Pentagon spending is primarily a political problem, not an economic one, and it calls for a political solution.

William D. Hartung

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