Fanny Coulomb

An Economic Interpretation Of French Military Expenditures

In the post‐Cold War context of decreasing military expenditures and arms‐market crisis, France has redefined its defence policy, giving up the model of protected arms production and exports while reasserting its military and strategic ambitions. But does the country still have the means of its ambitions? The analysis of statistical data since 1990 may show that the independent policy of security has been clearly replaced by a real dependency on armaments and strategies, in the context of higher budgetary constraints. Military expenditures now seem to be more an economic burden than a driving force. The study of the defence budget compared with the general state budget shows that military expenditures are often used as variables of economic adjustment and that inertia effects are important. Several aspects of the French defence policy are underlined, notably the weakness of French military research and development, the declining share of capital expenditures in the defence budget and the decreasing investment in the nuclear field. In addition, the French arms industry suffers from a too‐belated restructuring and from the continuing compartimentalization of European markets.

Adam smith: A defence economist

For Smith, “defence” is presented as one of the three big areas requiring the “expenses of the sovereign or Commonwealth”, and therefore justifying state intervention in the economy, beside “justice” and “public works and public institutions”. Against the mercantilist thought, Smith considers that the process of liberalization is a condition of disarmament and peace. It supposes mainly the decolonization, the reduction of defence burden, the eradication of slavery, the denunciation of the mercantilist policy, and the international respect of free trade. Development is both a consequence of liberalization and the main cause of peace.

The Marxist analysis of war and military expenditures, between certainty and uncertainty

In analysing capitalism, Karl Marx dealt little with issues of international relations and militarism – Friedrich Engels was in charge of these questions. But war has never been integrated in the Marxist diagram. However, Marx and Engels’ writings contain essential remarks on international conflicts conceived as a consequence of the class war, on militarisms role in industrial development and on trade wars replacing armed conflicts. These ideas have later been developed by Marxist theorists, notably in pre‐revolutionary Russia, with an insistence on the warlike character of capitalism at the stage of imperialism. The Marxist analysis of militarism was continued after the Second World War, accompanied by a controversy on the impact of military expenditure on the profit rate.

THE GENESIS OF ECONOMIC THOUGHT CONCERNING WAR AND PEACE

This article links the development of political and philosophical thought with that of economic thought concerning war and peace issues. The economic orthodoxy that emerged during the 17th century presented human relations as peaceful, society being governed by a ‘natural order’, the Smithian ‘invisible hand’. On the other hand, political theory saw emerging a realistic view with human relations characterized by violence, with conflict being societys normal state. This dichotomy explains the relative scarcity of economic studies on war and peace issues and the fact that these have been more often studied by heterodox authors.

Disarmament in the next millennium

The economic analysis of disarmament in the next millennium may be developed from three main perspectives: At the end of the 20th century, the data seem to confirm, at least partially, the reality of a world disarmament process. There is an obsolescence of the disarmament analyses developed since the end of World War n, with arms race models and macroeconomics theories of disarmament. In the 21st century, the disarmament process will have to take new forms, and integrate other aspects than those traditionally considered, notably the economic crisis and the maintenance of economic wars.

The economic reorganization of the military sector at the beginning of the twenty-first century

The end of the Cold War has led to several changes in the arms industry at the world level. The expected “peace dividends” did not appear, as the crisis on arms markets, due to the decrease in military expenditures, was not yet overcome when the defence budgets picked up again. Since the 2000s, the market logic has been encouraged in Western countries to restructure the arms industries: the development of generic or dual technologies was encouraged, as well as the diversification on civil markets. If the consolidation of the American arms industry has been quickly achieved, thanks to a strategy of rationalization and cost reduction, as well as of integration of military activities, the results have been less convincing in Western Europe, while the countries of ex-Warsaw pact suffered from a dramatic industrial crisis.

THE FIGHT OF A 'CITIZEN ECONOMIST' FOR PEACE AND PROSPERITY: KEYNES AND THE ISSUES OF INTERNATIONAL SECURITY

John Maynard Keynes was a citizen economist, anxious to defend a capitalist system threatened by the rise of totalitarianism during the inter‐war period. His criticism of the Versailles treaty in 1919 was supported by the idea of a link between economic prosperity and international peace. During the crisis of the 1930s, he advocated using the League of Nations for a peaceful settlement of international conflicts; while being in favour of economic interventionism, he criticised mercantilist policies. He recognised that military expenditure may be used as a reflationary policy, but after 1945 his theory was misused to promote the development of a ‘defence‐based’ economic policy.

WAR AND PEACE ISSUES IN THE HISTORY OF ECONOMIC THOUGHT: INTRODUCTION

10.1080/10242690802354246 Defence and Peace Economics 24-2694 (print)/1476-8267 (online) Original Articl 2 08 Taylor & Francis 9 50 ctober 2 08 F nnyCoulomb fanny. oulo b@upmf-grenoble.fr The rising cost of the ‘global war on terrorism’ is pushing American defence spending to over

J.K. Galbraith: Economist of the Peace

600 billion a year, its highest absolute level, and without a large-scale conflict. Simultaneously, many countries, especially in East Asia and Russia, have been increasing their defence budgets since the beginning of the 2000s, ending the global fall in military budgets that had characterised the previous decade in spite of the absence of major international tensions. This explains why, according to SIPRI (2008), defence spending worldwide has increased by 45% since 1998. World military expenditures are estimated to have reached

Disarmament: A century of economic thought

1339 billion in 2007, which is 2.5% of world gross domestic product. This incredible trend towards higher and higher defence spending – while the world can be considered as relatively peaceful – is bound to favour a revival of debates on the economic causes, real scale and consequences of such spending. The seminal study on the total costs of American operations in Iraq published by Joseph Stiglitz and Linda Bilmes (2008) helps understand the magnitude of economic resources dedicated to today’s military operations. Other publications also try to size the dimension of today’s military expenditures worldwide. Underlining such social burden is truly necessary, as it is often underestimated, but this is not sufficient to understand the role that defence spending plays in market economies. Indeed, analytical tools are necessary for determining the links between defence spending and economic growth as well as the non-economic determinants that legitimate or explain why some countries devote a large share of their GDP to defence objectives. A fiscal perspective should include non-economic determinants. For instance James Laxter’s (2008) latest book, The Perils of Empire: America and Its Imperial Predecessors, echoes Paul Kennedy’s (1987) seminal book, The Rise and Fall of the Great Powers, two decades ago by linking the rising level of defence spending with the quest for international power, or more precisely the wish to remain a superpower. However, at the same time, many critics underline the social burden of this spending, asking to reducing taxpayers’ bills by downsizing defence budgets. Even though economic models and econometric studies are useful to understand the economic benefits or costs of defence spending, we also need a theoretical framework that