The Political Economy of US Military Spending

Abstract The causes of the dramatic rise in military spending in the post-war era have been the subject of much political and academic controversy. No extant formulation seems to provide a compelling explanation of the dynamics involved in the levels of, and rates of change in, such spending. In light of this, the authors develop a new model, based mainly on a political-business cycle argument, to account for these dynamics. The basic proposition in this model is that variations in national defense spending arise from political considerations which are related to real and desired conditions within the national economy. Applying this model to the experience of the United States 1948-1976, the authors show that it has a large measure of empirical validity. If one removes the effects of war-time mobilization, it is clear that for the United States the principal driving forces in military spending dynamics were (1) the perceived utility of such spending in stabilizing aggregate demand, (2) the political or electoral value of the perceived economic effects arising out of such spending, and (3) the pressures of institutional-constituency demands.