Why the US has a Perpetual War Economy

During WWII, government decisions stopped all market fluctuations. A major power in the middle of a serious war, cannot allow markets to boom and bust. Economic effort was singularly aimed at victory. Besides victory, people just worried about what things would be like once the war was over. The Americans were not themselves suffering from bombing. They never have done. So, an extra year of war was not nearly as great a worry as the question of how the war economy could be switched to peacetime conditions.

Most economic experts thought the transition would involve a violent crisis. Americans were pessimistic. Post-war unemployment, counting women engaged in war work, of up to 20 million were commonly predicted, based on the heavy readjustment crisis after WWI. Things would be no different after WWII, they predicted.

Then there occurred the American economic miracle—the demobilization of ten million people without any upheavals. Transition to a peacetime economy was smooth. Unemployment rose to less than four million—half as much as before the war. The US had mild recessions in 1946, 1949, and 1954 but nothing like a real crisis. America's faith in heaven on earth revived, and the specter of 1929 faded.

Economic optimists quickly became confident, for three reasons:

1. the American economy was less speculative, as post war stock exchange transactions show, and speculation was strictly controlled compared with 1929, when reckless gamblers used unlimited credit to drive stock to precipitous heights—something that is again familiar
2. Keynesian principles were applied—a downward trend in the economy was helped by a dose of inflation, and conversely an unhealthy boom invited deflationary measures such as a gentle credit squeeze.
3. the main one, now obviously swept under the carpet, was rearmament—the perpetuation of the war economy. After WWII, the US continued to spend twenty times as much money on its armed forces and military aid abroad as before the war. In the early post war years, between 12% and 15% of the national income was directly or indirectly spent on war and war preparations, employing 10-12 million people on the Federal budget, near enough the same number as were unemployed pre war.

Post war, financial speculation gradually returned, and Keynesianism was abandoned under pressure from the right wing fad of monetarism, and eventually, Reagan and Thatcher abolished all the regulations that had kept banks and markets under control and stable.

As for the third, and most important factor, it never changed! Rather it has become increasingly important. In fiscal year 2010, total US defense spending accounted for 38–44% of estimated tax revenues. Over sixty years after the war, Americans still spend a large fortune on warfare and armaments supporting, with their tax dollars, the death of their own boys, 6000 miles away murdering mainly innocent Moslems, people simply trying to assert their own freedom in their own country. All of this mayhem to avoid giving benefits to those Americans they call idle—people who cannot find work—and profits to billionaires who could do with a lot less.

The US since the last war has maintained a war economy, supporting utterly wasteful and cynical military adventures all over the world. And the American people seem to be happy it should remain the case when the federal government could be creating useful jobs through civilian projects. Alternatively, why not just give the unemployed sufficient benefits to live on, so that by spending them they thereby employ others! Every tax dollar spent by the government at the grass roots of society is multiplied five times over, as it is successively spent.

A fabulously wealthy country spends over a third of its tax revenue supporting the military industrial complex, when it could transform derelict cities like Detroit, and the decaying suburbs of many other famous cities, taking millions of US citizens off drugs and tranquilizers by letting them live decently. Yet the childishly unselfcritical Yankees profess bafflement that the wicked world does not love them! Will enough Americans ever realize that they are being treated with contempt by the political caste in Washington, the gentlemen soldiers of the ruling megarich elite? They are too ready to believe the bullshit they are constantly fed.