Who Pays for Defense? 1

Theories of the economic causes of war are at least as old as capitalism, and have in recent years appeared in myriad forms. Around the turn of the last century J. A. Hobson and Lenin developed their famous arguments about the economic driving forces behind imperialist expansion; American opponents of their country's entry into World War I blamed the lobbying of munitions makers; more recently we have had C. Wright Mills and the New Left. The assertions of these theorists are not always susceptible to scientific examination, but to supplement them there have in the past few years been a number of sound and well-documented studies locating in the national economy the groups that benefit most from military expenditures. Such studies show very effectively which industries, and which states, gain disproportionately from defense spending and hence develop some special interest in maintaining or increasing those expenditures. One need not accept Marxist or other extreme positions on the causes of war to find such information relevant to identifying political pressure groups that must be countered or compensated in any effort to reduce the level of military spending. A question closely related to “Who benefits from defense spending?” is, of course, “Who pays for it?”; but curiously this second problem has received very little attention. Nothing comes free, and defense is no exception. In this paper we shall examine some evidence about what segments of the economy and society sacrifice disproportionately when defense spending rises.