How does military spending effect the country?

The American military spends a lot of money; that much is pretty obvious. Between its various operations, its research and development, and its salaries of military personnel, billions of dollars are spent. In fact America spends more money of its military than the next top 15 countries in military spending combined, almost 700 billion dollars. However this post isn’t another scathing denunciation of the astronomical budgets or a critique on the effectiveness of our military power versus guerrilla attacks. This will be an attempt to properly analyze and examine the benefits and disadvantages of military spending by using economic principles.

Externalities are economic side effects of a good or service that generates costs or benefits to someone other than the person making the decisions. One major externality of military spending is increased demand for military goods and services generated directly by the government. The government pays those who serve in the armed forces who in turn spend that money in the consumer market stimulating the economy twice: Providing jobs while also increasing the number of items supplied and demanded in the market raises the total GDP. Additionally the demand for military equipment would stimulate metal and manufacturing industries. In World War II this demand for ships, planes, soldiers, and other military supplies brought the US out of a devastating ten year depression.

Another important benefit of military spending is the advancements in technology by military research. Many important advancements in science were developed by the military and then later applied to civilian sectors. To name a few: computers, radar, nuclear power, helicopters, and of course the ultimate advancement that lets you read this post: THE INTERNET! Many of these advancements were developed partially or even completely developed by virtue of the military, and some are now inseparable from modern life. Would our current lifestyle be anywhere near as convenient without the internet? Not to say that if the military had never brought it to existence some one else wouldn’t have been able to. However, since technology has been shown to grow at an exponential rate, the earlier a discovery has been made the quicker it will advance.

While military spending does bring positive externalities to the economy it has been argued that should the equivalent military expenditures be spent in non-military public goods such as education, health care and creation of infrastructure the result would be more effective. In other words spending money on the military would be less effective since the military is a monopoly that cannot be greatly affected by other businesses. It’s methods of training people and researching and developing new technologies would be less effective than the free market struggle which brings forth the most effective styles and techniques. Additionally since the human capital being created is designed for warfare, the effectiveness between military training and civilian training would substantially favor the non-military side.

Websites used:

Questions to consider:

Do countries need a military?

How could decisions of purchasing military equipment be influenced by buisnesses?

Why is the US spending so much more than other countries on the military?

One Response to “How does military spending effect the country?”
  1. Muntz says:

    “One major externality of military spending is increased demand for military goods and services generated directly by the government.”–> it doesn’t count as an externality if it affects the same organization that caused it.

    Overall good post. The last paragraph could be a little more clear. Some additional revision needed.


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