From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Wed Nov 03 2004 - 08:31:11 EST
Rakesh As for military expenditures their main positive effect is not through the increase in effective demand per se but in the consumption of higher cost or morally depreciated capital equipment that military spending and even more war cause. High cost capacity used up, opportunities for investment in lower cost capital goods are thereby widened and anticipated profitability improved: war thus allows for the destruction of capital that depression would otherwise effect. ------------ Paul It is probably the case that the destruction of capital equipment produced by the 2nd world war increased profitability in Japan and Germany, but can you think of any other cases? In the US, UK, and France there was much less destruction of productive capital. In the US there has been no significant military damage since the Civil War. Since the US accounts for the greater part of world Military expenditure, the main effect of this has to be seen in terms of the boost to economic activity that it has produced in the USA for the last 60 years. What would the economic history of the US have been like if during that period military budgets had been at 1920's levels? I would have expected several recessions at least as severe as those of the 30s.
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