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The US Military-Industrial Complex 1
Alternative Business Alternative Business NetworksNetworks
The US Military-Industrial The US Military-Industrial ComplexComplex
Plowshares to Swords
The US Military-Industrial Complex 2
The Military-Industrial Complex
1. History of the Term
2. Federal Government: The US Budget (1940 to 1949)
3. Department of Defense: Changes in Public Perception (1949 to 1961)
4. Academic Sector: Impact on Productivity Growth (1961 to 1980)
5. Industrial Sector: Inefficiency and the Market (1980 to 1990)
6. The Military-Industrial-Congressional-Academic Complex
The US Military-Industrial Complex 3
Origin of the TermOrigin of the TermUntil the latest of our world conflicts, the United States had no armaments industry. American makers of plowshares could, with time and as required, make swords as well. But we can no longer risk emergency improvisation of national defense. We have been compelled to create a permanent armaments industry of vast proportions. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security alone more than the net income of all United States corporations.
Now this conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence -- economic, political, even spiritual -- is felt in every city, every Statehouse, every office of the Federal government. We recognize the imperative need for this development. Yet, we must not fail to comprehend its grave implications. Our toil, resources, and livelihood are all involved. So is the very structure of our society.
In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.
34th US President 34th US President Dwight D. EisenhowerDwight D. EisenhowerFarewell AddressFarewell Addressdelivered on January 17, 1961delivered on January 17, 1961
The US Military-Industrial Complex 4
Funds
Funds, political justification
maximisation of utility
minimisation of opportunity costsprotectionsubventions(capital stock)personnel
Lobbying
Employment
Contracts
personnel
Funds support co-operation technology
technology
Comparative advantage
Equipment
The Functioning of the MIC:
The Political Administration
Funds support co-operation
The US Military-Industrial Complex 6
Funds
protectionsubventions(capital stock)personnel
The Functioning of the MIC:
Federal Government
Funds, political justification
The US Military-Industrial Complex 8
GAPAGAPA (Ground-to-Air Pilotless Aircraft): High-AltiMissile Programme, started during WWII to counter German V-1 Buzz Bombs
Bomarc: First mass-produced survace-to-air missile (developed together with University of Michigan)
Minute Man: ICBM; family in service until 2010
Why it is good to be in it from the start:
Boeing’s missiles
1961
WWII1944-49
V-1 Buzz Bomb
Bomarc Minute Man I-III
1957
The US Military-Industrial Complex 9
Path Dependency:
The Economies of the Minuteman
In 1967
1,000 Minuteman ICBM operational
39,700 workers involved
35,000 suppliers
more than 18,000 subcontractors (peak each)
„Minuteman established the company as a manager of complex systems and also provided Boeing with a wealth of experience in
propulsion and guidance systems “
http://www.boeing.com/history/narrative/n053boe.html
The US Military-Industrial Complex 10
0
50000
100000
150000
200000
250000
300000
350000
1940
1944
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
tho
usan
d U
SD
(cu
rren
t)
0
100000
200000
300000
400000
500000
600000
700000
1940
1944
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
tho
usa
nd
US
D (
FY
199
0)
Development of Military Budget 1940 to 1997
Historical Tables of the Budget of the United States Government. Fiscal Year 2009
The US Military-Industrial Complex 11
0
2
4
6
8
10
12
14
16
1947
1952
1957
1962
1967
1972
1977
1982
1987
1992
1997
per
cen
t o
f U
S G
DP
Historical Tables of the Budget of the United States Government. Fiscal Year 2009
Military Expenditures relative to US GDP
The US Military-Industrial Complex 12
maximisation of utility
minimisation of opportunity costs
Contracts
personnel
The Functioning of the MIC:
Military
Funds support co-operation
The US Military-Industrial Complex 14
Estimated Minimum Incurred Costs of U.S. Nuclear Weapons Programs, 1940-1996
Total Costs: USD 5,821.0 billion (constant FY1996)
The US Military-Industrial Complex 15
technology
technology
Comparative advantage
The Functioning of the MIC:
Academic Sector
The US Military-Industrial Complex 16
Economic Convergence Theory IEconomic Convergence Theory I
Total Factor Productivity Relative to USA (Lowest Employment Growth Countries)
The US Military-Industrial Complex 17
Changing competitiveness of US corporations
Chandler: US Corporations Appendix B
The US Military-Industrial Complex 18
Lobbying
Employment
Equipment
The Functioning of the MIC:
Industrial Sector
Funds support co-operation
The US Military-Industrial Complex 19
Working of the MIC
http://en.wikipedia.org/wiki/Iron_triangle
The Military-Industrial Complex
1. The Theory Behind
2. Demand-Side: Federal Military Spending
3. Supply-Side: The US Oligopoly
4. The Pros
5. The Cons
The US Military-Industrial Complex 21
Market for Military EquipmentEs
timat
ed c
osts
per
uni
t
(Bilateral) Monopoly
Bilateral Oligopoly
de-facto free marketOligopoly
Market per ProductSupplier Demander Example
(bilateral) Monopoly one US DoD Carriers Ibilateral Oligopoly few Military Tanks/ Rifles IIOligopoly few open trucks IIIopen market open open sunglasses IV
Number of Companies able to compete for contract
IV
III
II
I
The US Military-Industrial Complex 22
Only US shipyard capable of constructing aircraft carriers
During World War Two substantial enlargement due to Federal funding
Until 1991 publicly owned company; bought by Northrop Grumman
Example: Newport NewsExample: Newport News
The US Military-Industrial Complex 23
The MIC and the End of the Cold The MIC and the End of the Cold War: ConsolidationWar: Consolidation
http://www.sipri.org/contents/milap/milex/aprod/m_and_a_jv.html