Corporate Power and Expansive U.S. Military Policy

• Author: Mason Gaffney
• Date: 01 March 2018
• Published date: 01 March 2018
• DOI: http://doi.org/10.1111/ajes.12222

Corporate Power and Expansive

U.S. Military Policy

By MASON GAFFNEY*

ABSTRACT. Military defense is generally treated in economics texts as a

“public good” because the benefits are presumed to be shared by all

citizens. However, defense spending by the United States cannot

legitimately be classified as a public good, since the primary purpose of

those expenditures has been to project power in support of private

business interests. Throughout the course of the 20

th

century, U.S.

military spending has been largely devoted to protecting the overseas

assets of multinational corporations that are based in the United States

or allied nations. Companies extracting oil, mineral ores, timber, and

other raw materials are the primary beneficiaries. The U.S. military

provides its services by supporting compliant political leaders in

developing countries and by punishing or deposing regimes that

threaten the interests of U.S.-based corporations. The companies

involved in this process generally have invested only a small amount of

their own capital. Instead, the value of their overseas assets largely

derives from the appreciation of oil and other raw materials in situ.

Companies bought resource-rich lands cheaply, as early as the 1930s or

1940s, and then waited for decades to develop them. In order to make

a profit on this long-range strategy, they formed cartels to limit global

supply and relied on the U.S. military to help them maintain secure title

over a period of decades. Those operations have required suppressing

democratic impulses in dozens of nations. The global “sprawl” of

extractive companies has been the catalyst of U.S. foreign policyfor the

past century. The U.S. Department of Defense provides a giant subsidy

to companies operating overseas, and the cost is borne by the

taxpayers of the United States, not by the corporate beneficiaries.

*Professor of economics emeritus at University of California, Riverside. Email:

m.gaffney@dslextreme.com. Author of After the Crash: Designing a Depression-Free

Economy (2009) and The Corruption of Economics (1994). The latter examines how

economics was historically distracted from its potential to create models of an econ-

omy based on both efficiency and equity.

American Journal of Economics and Sociology, Vol. 77, No. 2 (March, 2018).

DOI: 10.1111/ajes.12222

V

C2018 American Journal of Economics and Sociology, Inc.

Defining military spending as a “public good” has been a mistake with

global ramifications, leading to patriotic support for imperialist

behavior.

Introduction

Corporations are heavily involved in the military programs of the

United States.

1

On the one hand, they build weapons systems for the

Pentagon under contract, often with large cost overruns. On the other

hand, all American corporations with overseas investments benefit

from U.S. military spending. The net effect is that business ties with the

military have increased the power of corporations, distorted the politi-

cal system in the United States in favor of elite interests, encouraged

waste of productive potential, and led to the United States functioning

as the world’s police force. That last effect is part of an expansionist for-

eign policy that has embroiled the United States in military action

almost every year of the 20

th

and 21

st

centuries (Grimmett 2010: 7–30).

On the procurement side, consider only the latest fiasco. The F-35 jet

program, built by Lockheed-Martin, is currently scheduled, after seven

years of delay, to cost $406.5 billion for procurement and over $1 trillion

in lifetime operating and maintenance costs (Capaccio 2017). The project

has been the object of ongoing criticism from the U.S. Congress. The F-35

is less combat-ready than its predecessors, but despite its litany of techni-

cal problems, the Pentagon has deemed it “too big to fail” (Hughes 2017).

This is an exaggerated case of corporate welfare—a situation in which a

corporation is able continually to draw upon public revenues for an infe-

rior product, all because that corporation has amassed so much political

power. Bender, Rosen, and Gould (2014) show how Lockheed Martin is

able to influence the political system by the use of strategically located

subcontractors dispersed around the United States and the world:

One reason why the project has become such a boondoggle is that many

states and countries are significantly invested in the plane, relying on its

production for income and jobs. Every U.S. state but Alaska, Hawaii,

Nebraska, and Wyoming has economic ties to the F-35, with 18 states

counting on the project for $100 million or more in economic activity,

according to primary contractor Lockheed Martin. All told, the project is

The American Journal of Economics and Sociology332

supposedly responsible for 32,500 jobs in the U.S. Globally, another nine

countries have major ties to the F-35.

This is how corporations function in the world of defense contracts.

They create “white elephants” that the government is forced to buy to

avoid angering the constituency of key members of Congress.

On the other side of the ledger are the more than $5 trillion in assets

held by U.S. corporations in foreign countries (US CIA 2016). The U.S.

military devotes a large portion of its resources to protecting those

foreign investments, although it defines those assets as “the interests of

the United States.” Few people who use that language stop to think that

those interests are mostly private, not public. Why should someone

who invests in a company with oilfields in Angola, Kazakhstan, or

Sudan receive the protection of U.S. military forces without any charge?

Why should American taxpayers pay this cost? Why should young

Americans be sent to fight to protect those investments? Why should

the United States provoke other countries into becoming “endless ene-

mies” to protect private investments (Kwitny 1984)? There is no reason

the price of oil could not reflect the true cost of obtaining it. Alterna-

tively, some international body might collect the oil rents so there

would be less value worth fighting over. In fact, American taxpayers

spent about $50 billion a year in the 1990s to project American power

into the Persian Gulf. If that cost had been factored into the price of oil,

the true net cost of oil from that region would have reached $100 per

barrel by the mid-1990s(Lovins and Lovins 1995).

The question that I seek to answer in this article is how corporations

have managed to cloak themselves with patriotism when their assets

are at risk in other countries and yet refuse to share the benefits of their

activities with the governments that pay for these protection services.

This does not mean that the U.S. military spends no money on

legitimate security interests. But in a world where corporate interests

have become so closely tied to American foreign policy, it is difficult to

know precisely where to drawthe line.

The Fig Leaf: Defense as a Public Good

The use of military spending in the United States to defend private

interests has received surprisingly little attention over the years.

Corporate Power & U.S. Military Policy 333