Cold War Capitalism: The Political Economy of American Military Spending, 1947-1990

Abstract

Abstract

Cold War Capitalism The Political Economy of American Military Spending, 1947-1990

Everyone knows that the relationship between capital and the state was transformed by the Great Depression, but historians of the United States have dramatically understated the militarist character of the new order. Prevailing accounts center on mass consumption, but the share of consumption in national income fell during the “golden age.” Standard treatments conflate big government and the welfare state, but the share of federal nonmilitary spending in the economy changed little between 1929 and 1959. The dominant new force was military spending. Since aggregate demand shapes employment and output in both the short and long term, military spending during this period helped set the tempo and direction of broader macroeconomic trends. Given the distribution of political and social power at the time, no other form of government spending could have achieved the same scale and played the same role. We often refer to the exceptional decades after 1945 as “post-war capitalism.” But given the persistent influence of military outlays, this was really an age of Cold War capitalism.

My dissertation also reveals that historians and the general public remember the post-1945 “golden age” as more stable and egalitarian than it in fact was. Even before the 1970s malaise, the economy hardly took care of itself. Within the broader period of relative stability, history still followed what Hofstadter called the “jagged movements on the business-cycle graphs.” The strongest periods of growth and employment were the booms related to the wars in Korea and Vietnam. At other periods, joblessness and stagnation became central topics of political debate. Retrenchment in defense spending contributed heavily to recurrent recessions. Even during the boom years, economic growth was an occasion for social conflict as much as consensus. Patterns of class conflict were closely related to defense-driven demand conditions, with labor gaining ground during military booms and business fighting back during the subsequent recessions. Meanwhile, persistent business fears about inflation (and government controls) continued to limit the extent of expansionary policy, even in its militarized guises.

The age of high military Keynesianism fell into crisis during the Vietnam War boom. After 1970, the share of defense in the federal budget and in GNP declined. But for more than a decade, no viable formula for a new political economy emerged. By the 1980s, a new neoliberal order was taking shape, defined in part by the waning and then disappearance of the Soviet threat that had defined the Cold War. But the new order had umbilical links to the old one. During the transition, the Reagan defense boom helped secure popular support for otherwise politically untenable neoliberal measures. In the 1990s, defense spending fell sharply without taking down the wider American economy. But the fundamental instability of private investment—the problem to which military Keynesianism had once provided a solution—remained as vexing as ever. The ad-hoc socialization of investment would take on new forms, with central banks assuming new importance. But capitalists remained as dependent on, and suspicious of, state support as they had been during the Cold War.