After the attack on Pearl Harbor, President Franklin Roosevelt said that December 7th, 1941, was “a day which will live in infamy.” Eighty years later, his prediction seems to be holding up well. The geopolitical effects of America joining World War Two are well known, but what about the economic ramifications?
American military production had been ramping up for months with the Lend-Lease policy of “loaning” war materials to the Allied nations. With the attack on Pearl Harbor, however, the last veneer of US neutrality was dropped, and the economy shifted into high gear. Government contracts boosted production of the machines for war — hundreds of thousands of planes, thousands of ships, and tens of billions of dollars worth of munitions poured out of factories.
This increased demand flushed the idle capacity from American factories, some of which still lingered from the Great Depression. In 1933, when FDR became President, the sluggish economy had steel factories running at just 12% of capacity; with the declaration of war, manufacturers needed all the steel they could get. The economy boomed, and unemployment dropped to 1.9%.
Much of this spending was fueled by running government deficits, an unorthodox position championed by economist John Maynard Keynes as a way to redirect and boost economic production. In a 2020 biography, The Price of Peace, Zachary Carter wrote:
The Second World War transformed Keynesian economics as a profession, winning the doctrine an unexpected set of institutional allies in what Dwight D. Eisenhower would eventually label the “military-industrial complex.” Keynesian ideas, which had been developed explicitly to combat “militarism,” became essential to the maintenance of a permanently militarized world.
This, then, was the lesson learned from Pearl Harbor; military spending is good for the economy. In 2021, on the 80th anniversary of the attack, the House of Representatives authorized the largest military budget in human history, about $770 billion dollars. Defense spending serves as a source of income in most, if not every, congressional district in the United States; they “create jobs,” and members of Congress will fight to keep the money flowing to the pool of voters in their districts.
When the 2010 New START (STrategic ARms control Treaty) agreement required the decommissioning of 50 nuclear missiles, legislators from Montana and other “missile caucus” states moved to block implementation. These silos bring a crucial source of income to large parts of the region; the viability of a local restaurant east of Great Falls is determined by the airmen who stop for food there, with the military making up around 35% of the region’s economy. Under pressure, the Pentagon eventually agreed to make the reductions in the least cost-effective way possible; spreading out the missile removal across the entire system and maintaining the now-empty silos instead of closing them permanently.
With money always flowing out of these regions to large national companies such as Wal-Mart and Amazon, it is essential to the American economy that it be replaced, just as winter snows replace the water in the mountains that has flowed downstream all year. Staffing missile silos 24/7 in the middle of nowhere serves this economic purpose. (Perhaps it is ironic that their strategic purpose, in case of nuclear war, is to serve as a target in a low population area.) Peace advocates who demand a reduction in military spending must recognize the real economic problems that are being addressed.
In 2022, the American Union — a union of swing voters — offers a solution to this problem; pairing military spending cuts with universal basic income (UBI). As part of a proposed legislative package to end poverty, end mass incarceration, and end the endless wars, every American adult would receive an unconditional $300 each week (plus $100 for children) to spend however they saw fit, injecting over a billion dollars each month into the local economies of states like Montana.
The same legislative package also requires cuts to the military budget; a mandatory reduction of 10% for four consecutive years, bringing the US back to 2005 spending levels. In addition, more of those missile silos would be closed as part of a 50% reduction in the nuclear stockpile by 2027. UBI would more than offset the reduced military spending in most local economies and promote a less militarized world at the same time. (The framers were so opposed to standing armies that they restricted them in the Constitution.)
Better yet, UBI would bring increased demand for goods and services as people had more money to spend. Like it did after Pearl Harbor, the increased demand would spur production in a post-pandemic economy and flush out lingering idle capacity. In turn, this growth would fuel more production, and America will realize that the takeaway from World War Two — military spending is good for the economy — contains a superfluous adjective.
This vision of peace and prosperity can be achieved with the adoption of the crowdsourced legislative package backed by the American Union. By demanding Congress put this legislation on the President’s desk prior to the 2022 election and using that as a metric for endorsement instead of party affiliation, a union of swing voters can win us all a better social contract. Learn more at AnAmericanUnion.com.