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The US Military-Industrial Complex 1

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The US Military-Industrial The US Military-Industrial ComplexComplex

Plowshares to Swords


The Military-Industrial Complex

1. History of the Term

2. Federal Government: The US Budget (1940 to 1949)

3. Department of Defense: Changes in Public Perception (1949 to 1961)

4. Academic Sector: Impact on Productivity Growth (1961 to 1980)

5. Industrial Sector: Inefficiency and the Market (1980 to 1990)

6. The Military-Industrial-Congressional-Academic Complex


Origin of the TermOrigin of the TermUntil 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 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 alone more than the net income of all United States corporations.

Now 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 Statehouse, 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.

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 must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.

34th US President 34th US President Dwight D. EisenhowerDwight D. EisenhowerFarewell AddressFarewell Addressdelivered on January 17, 1961delivered on January 17, 1961


Funds

Funds, political justification

maximisation of utility

minimisation of opportunity costsprotectionsubventions(capital stock)personnel

Lobbying

Employment

Contracts

personnel

Funds support co-operation technology

technology

Comparative advantage

Equipment

The Functioning of the MIC:

The Political Administration

Funds support co-operation



The Political Administration


Funds

protectionsubventions(capital stock)personnel


Federal Government

Funds, political justification


Governmental property of production facilities

Melman, p.79


GAPAGAPA (Ground-to-Air Pilotless Aircraft): High-AltiMissile Programme, started during WWII to counter German V-1 Buzz Bombs

Bomarc: First mass-produced survace-to-air missile (developed together with University of Michigan)

Minute Man: ICBM; family in service until 2010

Why it is good to be in it from the start:

Boeing’s missiles

1961

WWII1944-49

V-1 Buzz Bomb

Bomarc Minute Man I-III

1957


Path Dependency:

The Economies of the Minuteman

In 1967

1,000 Minuteman ICBM operational

39,700 workers involved

35,000 suppliers

more than 18,000 subcontractors (peak each)

„Minuteman established the company as a manager of complex systems and also provided Boeing with a wealth of experience in

propulsion and guidance systems “

http://www.boeing.com/history/narrative/n053boe.html


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tho

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Development of Military Budget 1940 to 1997

Historical Tables of the Budget of the United States Government. Fiscal Year 2009


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Historical Tables of the Budget of the United States Government. Fiscal Year 2009

Military Expenditures relative to US GDP


maximisation of utility

minimisation of opportunity costs

Contracts

personnel


Military



Political Success of the Military Sector


Estimated Minimum Incurred Costs of U.S. Nuclear Weapons Programs, 1940-1996

Total Costs: USD 5,821.0 billion (constant FY1996)


technology

technology

Comparative advantage


Academic Sector


Economic Convergence Theory IEconomic Convergence Theory I

Total Factor Productivity Relative to USA (Lowest Employment Growth Countries)


Changing competitiveness of US corporations

Chandler: US Corporations Appendix B


Lobbying

Employment

Equipment


Industrial Sector



Working of the MIC

http://en.wikipedia.org/wiki/Iron_triangle

The Military-Industrial Complex

1. The Theory Behind

2. Demand-Side: Federal Military Spending

3. Supply-Side: The US Oligopoly

4. The Pros

5. The Cons


Distribution of Production facilities


Market for Military EquipmentEs

timat

ed c

osts

per

uni

t

(Bilateral) Monopoly

Bilateral Oligopoly

de-facto free marketOligopoly

Market per ProductSupplier Demander Example

(bilateral) Monopoly one US DoD Carriers Ibilateral Oligopoly few Military Tanks/ Rifles IIOligopoly few open trucks IIIopen market open open sunglasses IV

Number of Companies able to compete for contract

IV

III

II

I


Only US shipyard capable of constructing aircraft carriers

During World War Two substantial enlargement due to Federal funding

Until 1991 publicly owned company; bought by Northrop Grumman

Example: Newport NewsExample: Newport News


The MIC and the End of the Cold The MIC and the End of the Cold War: ConsolidationWar: Consolidation

http://www.sipri.org/contents/milap/milex/aprod/m_and_a_jv.html


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