Expected cuts in defense spending will not constitute a large enough portion of gross national product to have significant effects on the U.S. economy. Nevertheless, the United States has invested vast resources in developing human and physical capital for military production. If defense requirements, military personnel, and industrial capacity shift rapidly to nondefense work, it will be difficult for them to move back quickly to the military sector, and, therefore, the defense mobilization base will have been weakened, if not destroyed. The transition should be planned in order to maintain an adequate mobilization and surge capability and to ensure that research and development do not atrophy.
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References
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1. Merton J. Peck and Frederic M. Sherer, The Weapons Acquisition Process: An Economic Analysis (Cambridge, MA: Harvard University Press, 1962), chap. 2.
2.
2. William W. Kaufmann, Glasnost, Perestroika and U.S. Defense Spending (Washington, DC: Brookings Institution, 1989).
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3. Robert C. Zelnick, “We Could Easily Save $350 Billion,”New York Times, 12 Feb. 1990.
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4. David E. Rosenbaum, “Pentagon Spending Could Be Cut in Half, Ex-Defense Officials Say,”New York Times, 29 Nov. 1989.
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5. “Washington Roundup,”Aviation Week and Space Technology, 11 Dec. 1989, p. 31.
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6. For a very good, nontechnical review of the current state of the macroeconomic debate, see N. Gregory Mankiw, “A Quick Refresher Course in Macroeconomics,”Journal of Economic Literature, 28:1645-1660 (Dec. 1990).
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7. Lawrence R. Klein and Kei Mori, “The Impact of Disarmament on Aggregate Economic Activity: An Econometric Analysis,” in The Economic Consequences of Reduced Military Spending, ed. Bernard Udis (Lexington, MA: Lexington Books, 1973).
8.
8. This does not imply that any changes in defense will be reflected in opposite changes in development. Kenneth Boulding reports that almost all the increase in defense spending from pre-World War II to the post-World War II years was taken out of personal consumption. Boulding, “The Impact of the Defense Industry on the Structure of the American Economy,” in Economic Consequences of Reduced Military Spending, ed. Udis.
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9. David M. Lilien, “Sectoral Shifts and Cyclical Unemployment,”Journal of Political Economy, 90(4): 777-793 (1982).
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10. See Katherine G. Abraham and Lawrence F. Katz, “Cyclical Unemployment: Sectoral Shifts of Aggregate Disturbances?”Journal of Political Economy, 94(3): 507-522 (1986).
11.
11. There is some difficulty in estimating the total number of jobs devoted to defense work since some companies do both civilian and military work. Jacques S. Gansler reports that a $300 billion defense budget supports between 7.0 and 8.5 million jobs. Gansler, Affording Defense (Cambridge: MIT Press, 1989), p. 81.
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12. John H. Cumberland, “Dimensions of the Impact of Reduced Military Expenditures on Industries, Regions and Communities,” in Economic Consequences of Reduced Military Spending, ed. Udis.
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13. Richard W. Stevenson, “Hard Choices for Arms Makers, Cuts Could Change Industry Profoundly,”New York Times, 29 Nov. 1989.
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Seymour Melman , “What to Do with Cold War Money?”New York Times, 17 Dec. 1989.
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15. Murray L. Weidenbaum, “The Transferability of Defense Industry to Civilian Uses,”Convertibility of Space and Defense Resources to Civilian Needs: A Search for New Employment Potentials (Washington, DC: Government Printing Office, 1964), pp. 848-855.
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16. Wayne Leslie, “Arms Makers Gird for Peace,”New York Times, 17 Dec. 1989.
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Melman , “What to Do with Cold War Money?”
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18. Rick Wartzman, “Defense Firms Gird for End of Cold War, Prospect of Peace Has Industry Bracing for Shakedown,”Wall Street Journal, 29 Nov. 1989.
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19. B. Curtis Eaton, “The Individual and the Defense Mass Layoff,” in Economic Consequences of Reduced Military Spending, ed. Udis.
