National Security at What Price? the Economic Consequences of Military Spending

Abstract

The conclusion of the Cold War affords an opportunity to evaluate the consequences of America's defense policy of the last 45 years. Defense spending has a larger effect on the economy than the percent of GNP or number of Pentagon employees. Defense spending preempts scientific and engineering talent from other potentially productive endeavors, drains R&D funding, usurps money from infrastructure investment, and adds to budget deficits which in turn raise interest rates. In sum, defense spending diminishes productivity growth, and therefore slows America's economic standing relative to commercial rivals, such as Germany and Japan, which do not spend equivalent amounts on defense. It is quite probable that the rearrangement of our national priorities in pursuit of increased military strength has undermined the non-military dimensions of our national security in ways that outweigh military gains.