Capitalism and Armaments: Business Cycles and Defense Spending in the United States 1945—1979

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Abstract
Three possible economic explanations of U.S. military spending are examined: 1) the MIC explanation, 2) the economic stabilization and electoral defense cycle explanation, 3) the capitalist growth imperative explanation. Conditions for these explanations to be valid are formulated and tested with data about the development of defense spending, the U.S. economy, the business cycle, and fiscal policy, as well as an analysis of the Economic Reports and of secondary sources about U.S. defense and economic policies. All three economic explanations are considered inadequate. It is true that defense cuts have sometimes aggravated a recession, and that on other occasions defense has served as a cushion, or even worked more strongly anticyclically, when foreign policy crises occurred at the time of economic downturns. It is also true that military expenditures have played a role in fiscal policy. However, there have been economic reasons for increases and for cuts in the defense budget, and the amounts involved are rather small in absolute or relative terms. Defense is an important, but not the decisive factor in the U.S. business cycle; its weight has decreased substantially. There has been even no absolute growth in U.S. defense spending since the early fifties (in constant prices), and some absolute indicators have declined. Mostly, changes in U.S. military expenditures can and can only be explained by international and foreign/defense policy developments and considerations. These factors should be taken much more seriously.

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