The Economic Impact of the United States Military

One of the most persistent misconceptions in European communities is that wars and crises are beneficial to a country’s economy. The majority of people who have conducted studies on this topic appear to believe and cite some facts to support the myth, such as World War II, which occurred after the Great Recession, and the economy of the United States boomed in the aftermath. Unfortunately, many people have this incorrect view as a result of a misunderstanding of the economic way of thought. Many who has research on this issue tend to look on one side of the coin, that a country is going to war translate to rising in government spending on military sector. To them expansion in military expenditure means an increase in demand for weapons, military gears, and artilleries hence the creation of jobs as well as increased flow of money. However, the issue of war and economy has two sides of the coin. It can hinder the economic growth or promotes the growth depending on the circumstances.

The purpose of this paper is to seek for clarifications to questions such as; does going to war help economy? Where does the money go? What are the relationship of the U.S. political system and the impacts it has on military spending and the economy? How will going to war affect an individual and the future generation, businesses, and ordinary citizen economically? Well, these are tough questions; however, below are some of the views and thoughts that seem practical as this issue is concerned (Maxey, 2015). 

Does Going to War Help the Economy?

Going to war would mean increasing the military expenditure of the country if at all that nation in question is geared towards winning that war. Theoretically, the military expenditure may promote the economic growth in the following ways (Brown, 2013). It may lead to the development of new technologies that eventually spill over to other sectors of the economy. The spill over creates new and improve the old infrastructure as well as protection of citizens against threats, creates a socioeconomic structure through spin-offs effects, and may as well increase aggregate demand as well as employment through the Keynesian multiplier effect (Maxey, 2015).  On the other hand, going to war leading to the rise of military expenditure has a negative effect on the economy growth through crowding out investments and other economic activities productive to the public. The war is harmful to economic growth through its high opportunity cost, and more importantly, it raises the tax burden to the public as well as the government debt affecting the economy negatively. In the long run, the burden of servicing the war overrides the positive gains of war (Maxey, 2015).

The United States has engaged in several wars over the times and from records these engagements has affected the economy negatively. Major macroeconomic factor affected are; goods consumption, employment/jobs, investments, taxation, inflation as well as government deficits. According to Brown (2013), the U.S has serviced its wars differently, for instance, World War II, Iraq/Afghanistan War, and Cold War were serviced through debt, Korean War serviced through taxation, and Vietnam War through inflation. All these affect economy negatively. Other than means of funding the wars, several economic indicators usually experience negating effects during or after the wars. The level of taxation and public debt increases, the rate of consumption and investment as a percentage of GDP decreases with an increase in inflation (Maxey, 2015). 

Where does the money go?

The money goes to military expenditure and servicing the wars. The increased and excessive military outlay usually takes a lot of government money, thereby displacing productive non-military economic sectors that will bring real economic growth to ordinary citizens, for example, investing in the sector of education, high-tech industries, or in the sector of infrastructure (Maxey, 2015). The thronging effects of the excessive government expenditure on the military activities usually affect the service delivery of the people or the infrastructure development in a country if not kept in check, and eventually affect the long-term economic growth rate negatively. Comparison of the direct multiplier effect of the military expenditure to other forms of government expenditure, the research indicates it is not economically productive as compared to spending in other sectors of the economy as education, infrastructure, or cutting tax to increase household consumptions (Hossein-zadeh, 2006).

In summary, going to war is not good for economy growth. The high level and huge sum of government spending as a result of engaging in war seem to generate some positive economic benefits in short run, the usually meager economic growth experienced at the time of war spending booms. However, the negative effects that occur to the economy surpass the benefits, and they either occur concurrently as war continuous or gain momentum in the aftermath of the war. Eventually, it impedes the economic growth over the longer term (Maxey, 2015). 

What is the Relationship of the U.S. Political System and the Impacts It Has on Military Spending and the Economy?

Politics is the theory or the practice of governing and influencing people on the global level. It is the struggle of achieving and exercising position of governance or getting into executive position (Hossein-zadeh, 2006). The party that wins the political contest in a country normally forms the government, and thereafter the most decision regarding the running of the country affairs are made by the ruling party. This includes military expenditure of the country, and therefore, the political system of any country affects the military expenditure as well as the economy of the country (Hossein-zadeh, 2006). A good number of the political economists maintain that United States policy on national security is usually determined by the changes in the position of American regarding global economy. Various aspects of the political economy theories have considerable bearing to the field of international and national security in overall, more so in defense and military expenditures. The capital is limited, and it is going into one expenditure to one class implies that there is less cash for another project. This reality gets even more fascinating when we consider that any government expenditure exceeding revenue brings about a shortfall that adds to the national debt (Hossein-zadeh, 2006). The growth or enlargement of national debt economically affects every citizen of the United States, and huge military expenditure of the United States is one of the major contributors to this burden. As the national debt increase, the intrigue cost also increase, and the cost of acquiring quietly increments because of the hazard that expanded obligation speaks. In principle, the expanded debt will likewise delay financial development and in the long run a driver towards higher taxes (Hossein-zadeh, 2006).

Nonetheless, the US specifically has delighted in liberal obligation terms from private and worldwide banks, so the part that military spending plays a role in expanding the debt is for the most of the economy being neglected. A few who support the diminishing military expenditure have fixed it to a particular rate increment in the home loan rates individuals pay, given the connection between Treasury yields and business loaning. This thinking holds, and military spending sits as a huge rate of optional spending. In any case, it is as much the obligatory spending on social projects and wellbeing in the spending that drives the shortfalls as it is the non-optional, so military burning through alone is not to blame (Garrett & Rhine, 2010).

How will going to war affect an individual and the future generation, businesses, and ordinary citizen economically?

War can have numerous adverse effects on the community and society at large. The effects, however, depends on the most on what the society and community is like before the war occurred, how popular and important the war is to the people, whether the outcome of the war is in favor of that particular country, and what that war is all about/whether it touches the lives of the people directly. For instance, the major effect of the World War II on the United States citizens and the society in totality was fairly positive blame (Garrett & Rhine, 2010). It stimulated the economy of the US and lifted the country out of the Great Depression that the country was undergoing at that time. The WWII led to a great increase in solidarity and patriotism among the citizen of the United States. The war effect, in turn, necessitated the US to move with speed in giving civil rights to African Americans blame (Garrett & Rhine, 2010).

However, war has numerous adverse effects on the people and the society, and it depends on which side of the war you or your society is on. When your family or the community you belong to bears the front confrontation, then the impacts of war are devastating, the land is destroyed, cities and towns are burnt, employment and businesses are brought down, population and physical health of the people deteriorate as well blame (Garrett & Rhine, 2010). The war fought away from the country like the Afghanistan and Iraq war is not physical felt by the people regarding city destruction or businesses closing down due to war blame (Garrett & Rhine, 2010). However, the effect of government spending to service the war trickle down to an ordinary US citizen. It affects the normal citizen in terms of increased taxation, reduced service delivery due to an inefficient fund to roll out programs, poor education sectors, reduction in employment, high inflation rate, and these factors affect individuals and their future generation directly since they are the tax payers.

The increase in taxation and inflation affects both the private sectors and the public at the same time. To private sectors, it raises the cost of doing business in a country forcing many companies to retrench their workforce to a manageable level. Other businesses are forced to close shops completely and venture into other countries. This means loss of employment opportunities and a decrease in the employment rate. At the same time, none or very few businesses enter into the economy to create new employment to the people. Once many people become jobless, the dependency ratio increases and the buying power of the people decreases, and this eventually affects other business as well. To an ordinary citizen, the cost of living becomes very high, and the majority of the people are not able to afford basic needs efficiently. For instance, the cost of buying a house has increased tremendously same to the interest rates on loans, and this makes acquiring mortgage loan too expensive to service. Many, therefore, resort to renting houses. The life of the future generation is tied to the current economic conditions. When the current economy is dwindling, the generations to come are likely to find life too expensive to manage, taxation to high, basic needs very expensive as well as cost of living (Brown, 2013).

Conclusion

The impacts of military expenditure on financial development as well as unemployment factors (macroeconomic factors) of the ten Mediterranean nations, which are thought to be locally critical, were inspected by utilizing board information investigation. Concerning the period 2005-2012 years has been taken. As per the inquiry that arose while military spending impact on the financial development of the nations contrarily, it expands unemployment. While governments arrange their consumptions, they for the most part attempt to take the fields that will add to the improvement of nations into thought. However, because of the distress confrontation in countries near Mediterranean location, the significance of nation security becomes increased (Chang et. al, 2014).

The Governments isolate large shares of revenue to protection expenditure from their financial budget. This will compel the government to isolate less revenue to education investments, infrastructures, and the public health which will add to nation advancement. This will back off monetary development. Under way of guard items, more R&D exercises and assets are required (Chang et. al, 2014). As qualified staff will be required in this part, the representative turnover rate will be low. This will be a figure constraining business different segment. The transformation of some security enterprises to the current generation is restricted or does not exist by any stretch of the imagination (Chang et. al, 2014). The wasteful utilization of structures, organizations and creation limit built up for guard industry will bring about asset squander in financial terms. In addition, in a globalizing world, the capital developments between nations assume the vital position. While capital moves between countries, the trust and strength condition in nations is thought about and reviewed. Remote direct venture and circuitous speculations stream to nations where trust and dependability condition is guaranteed (Chang et. al, 2014).

Trust and steadiness condition in nations is a standout amongst an essential component influencing monetary development. Accordingly, of deadly implement endeavors of countries, which need political and military security, protection spending makes weight on spending incomes and direct governments to outer obligation, subsequently diminishing social welfare. The military spending in creating nations is somewhat on import premise, so they make an adverse impact on adjusted of installments. Therefore, of the examination performed in this review, it is watched that military spending impact the financial development of nations adversely. Thus, governments ought to make a more comfortable condition, diminish their guard spending and move their speculation assets to different territories, which will guarantee their financial development.

References

Brown, W. B. (2013). . EconomicImplications forthe United States of the Divided Korean Peninsula. Korean Peninsula Division/Unification: From the International Perspective, 31.

Chang, T., Lee, C. C., Hung, K., & Lee, K. H. (2014). Does military spending really matter for economic growth in China and G7 countries: The roles of dependency and heterogeneity. Defence and Peace Economics, 25(2), 177-191.

Garrett, T. A., & Rhine, R. M. (2010). Economic freedom and employment growth in US states.

Hossein-zadeh, I. (2006). The Political Economy of U.S. Military Spending. The Political Economy of U.S. Militarism, 203-245. doi:10.1057/9781403983428_9

Maxey, M. (2015). George W. Bush and the Iraq war of 2003: Deception, discourse, and the illusion of expansion (Doctoral dissertation, University of Central Oklahoma).