Economic consequences of armaments production: institutional perspectives of J.K. Galbraith and T.B. Veblen.

Author:Cypher, James M.

Within the Institutionalist School, both the writings of John K. Galbraith (sometimes erroneously identified as a "real Keynesian") and Thorstein Veblen are of fundamental importance, although scarcely on a par (Parker 2005, 198; Stanfield 1996, 153-159). Both were prolific and popular writers, both were literary stylists, both held neoclassical economics in contempt, and both offered creative interpretations of U.S. capitalism over the period of the long 20th century. Yet, distinctions abound. Veblen was the definitive outsider; Galbraith was the consummate insider--a solid member of the power elite (Mills 1956). Galbraith fit uneasily into one of Veblen's favorite categories--the Elder Statesman. Galbraith's role should be understood as that of Antonio Gramsci's "organic intellectual" or Russell Jacoby's "public intellectual"--a point well documented by Richard Parker (2005). In contrast, Veblen was an eclectic and tireless theorist. Most distinct of all regarding their interpretations of the economic role of military expenditures, Veblen believed that--other things remaining the same--the "price system and its attendant business enterprise" had run its course and would in short order be replaced by a system as yet unknown that would put an end to the private "rights of ownership and investment" (Veblen [1917] 1948, 625). Other things would not remain the same if nations could reintroduce the reactionary institution of patriotism by inculcating a warlike animus within the underlying population. War and the preparation for war would induce a dementia wherein the working class would cease to focus on its own needs and wants and proceed to actively and willingly play the crucial role in the maintenance of the status quo as they subordinated their interests to those defined as the national interests by the chief operatives of the economic system--the Elder Statesmen, the Captains of Industry and the Captains of Finance.

In other words, Veblen was willing to explore and dissect some of the most sanctified concepts that society beholds, most particularly the role of patriotism and the functions of militarism. Galbraith, in contrast, was content to raise some discomforting issues, but never in the devastating manner Veblen generally adopted. In short, Galbraith was a reformer while Veblen anticipated--with relish--the end of a social system, which he regarded as depraved and functionally counterproductive to the ends of human well-being and advancement. Galbraith found "imbalance" within the socioeconomic system of capitalism, but also internal mechanisms that could and should be harnessed to rectify the situation. Veblen saw no internal mechanisms that could be harnessed, all the internal mechanisms were the outgrowth of dysfunctional institutions that had historically evolved into the atavistic price system that he described as an "outworn institution ... fac[ing] disestablishment" (Veblen [1917] 1948, 627).

Contextualizing Galbraith on the Military

Galbraith's formal writings on the role of military spending in the economy are to be found in his pamphlet, How to Control the Military (1969a), some essays published in A View from the Stands ([1971] 1986), observations scattered in Economics and the Public Purpose (1973), and running commentaries in The New Industrial State ([1967] 1985).

For context, it serves to recall that in The Power Elite (1956), C. Wright Mills divided the U.S. elite into the corporate elite, which he took to be the dominant part of the tripartite division, the political elite and the military elite. The military elite, "the new men of power" arose from structural shifts as an immense and permanent military establishment was created between 1945 and 1949. Bases were built around the world, the peacetime military grew into the millions with another million plus serving as civilian employees of the vast Pentagon and the defense budget came to dominate the public sector. Military Keynesianism, a term Galbraith seems never to have used, became the means to stabilize the economy and to stimulate economic growth (Galbraith [1967] 1985, 6, 338, 342).

Galbraith, unlike virtually all high-profile economists during the height of the Cold War, was not hesitant to either acknowledge or criticize the extreme public sector imbalance created by the Cold War. Furthermore, Galbraith was a strong and highly visible dissenter from the view that the Soviet Union held parity with the United States on arms spending, or was ahead forcing the United States to boost spending to match the Soviets (Galbraith [1967] 1985, 348). Nor did he see the Soviets as bent on world conquest or acting in a way to upset the stability of Europe. As other big-name economists demurred, Galbraith stood out for his view that the United States and the USSR could negotiate and that the nuclear arms race, in particular, was led by the United States and controlled by "nuclear theologians" whose role it was to confound the U.S. citizenry on the nuclear capacity and intentions of the USSR (Galbraith 1986, 8-18).

Version I: The Military Bureaucracy on Top

While Galbraith's position on some of the central issues of the Cold War were crystal clear, his interpretation of what has commonly been known as the military-industrial complex was vague and seemingly contradictory. On the one hand, much of Galbraith's early work on the military made continual reference to "the military power," an entity that was never too strictly defined but embodied the military bureaucracy as well as (in a subordinate role) the military-contracting corporations. "The military power" had the capacity to overshadow the executive and legislative branches of government. "The military power" was thought to be capable of setting much of national and foreign policy of its own accord (Galbraith 1969a; 1969b). At the pinnacle of "the military power," one found the Department of Defense and the four Armed Services, and in descending order the specialized defense contractors, then the defense division of primarily civilian market oriented firms (e.g. Ford, General Motors). From this top tier (the military-industrial complex) we then descend to the "associate membership," the defense intelligence agencies, the Foreign Service Officers and country desks of the Dept. of State, the university scientists and defense-oriented think tanks such as RAND, and the military-related Committees of the Senate and House. On the other hand, Galbraith sometimes presented the military bureaucracy as part of a duality that included as its counterpart the military contracting corporations--each having equal weight, more or less, and in combination setting the spending level and...

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