Friday, August 5, 2022

An arms economy? (2022)

The Cooking the Books column from the August 2022 issue of the Socialist Standard

Speaking in June at Eurosatory, a weapons industry fair, French President Macron said that France ‘has entered into a war economy’ (

Strictly speaking, this is not true as a ‘war economy’ is when a state at war mobilises its economy for the one aim of winning the war. France is not currently at war, even though it is playing its part in arming NATO’s proxies in Ukraine. All he seemed to mean was that the French state should devote more resources to equipping its armed forces with the most up-to-date weapons of death and destruction and, as he was speaking at a merchants of death trade fair, selling some to other states.

There is another sense in which the term ‘war economy’ has been used – ‘military Keynesianism’. Keynes argued that there was no tendency under capitalism towards full employment and that the situation could occur, as in a slump, where not enough paying demand was being generated to bring about full employment. His answer was that the state should step in and increase its spending so as to boost demand. ‘Military Keynesianism’ is if this spending is on arms.

This appeared to work in Germany where the Hitler government’s spending on re-armament did reduce unemployment. In the US, too, the mass unemployment of the 1930s was not eliminated till the US entered the war. When the war ended this was not followed by a slump as many expected (including ourselves). One explanation that was offered for this was the continuing high level of government military spending.

One variety of this was the ‘permanent arms economy’ theory, espoused in Britain by the SWP’s predecessor, the International Socialists, and expounded by its economic expert, Michael Kidron. In an article with this title in 1967 ( and repeated in his 1968 book Western Capitalism since the War, Kidron said he shared ‘the assumption that we should collapse into over-production and unemployment were it not for some special offsetting factor’. That factor, he went on to argue, was a ‘permanent arms budget’.

He offered two explanations of how this worked to save capitalism. The first was pure military Keynesianism. ‘Expenditure on arms is expenditure on a fast-wasting end-product’, he wrote, that ‘constitutes a net addition to the market for ‘end’ goods’ and that ‘one obvious result of such expenditure is high employment and, as a direct consequence of that, rates of growth amongst the highest ever’.

But he also advanced the opposite view that arms spending slowed down the rate of capital accumulation and the fall in the rate of profit this caused and saved capitalism in that way. ‘Were capitalism left alone to invest its entire pre-tax profit, the state creating demand as and when necessary, growth rates would be very much higher’. It was this over-accumulation which, if unchecked, would lead to ‘collapse into over-production and unemployment’.

He was right about government arms spending slowing down capital accumulation as, having to be paid for out of taxes on profits, it reduced the amount of profits available for re-investment. But he was wrong that this saved capitalism from collapse. For, while there is indeed ‘a permanent threat of over-production’ under capitalism this is for other reasons than any long-term trend for too much capital accumulation leading to a fall in the overall rate of profit.

In any event, the permanent arms economy turned out to be not so permanent. It did not prevent the post-war boom, caused by reconstruction and the expansion of world markets, coming to an end in 1973 and replaced by a two-year period of slump that no government expenditure on arms or anything else was able to end. Keynes was wrong and so was military Keynesianism as an explanation of the post-war boom.

Blogger's Note:
A review of Michael Kidron's Western Capitalism Since the War appeared in the October 1968 issue of the Socialist Standard.

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