5 - Military Fiscalism

Summary

‘We live because of our son who is in the army’ (cited in Lindberg 2012: 69)

In the early 1970s, a controversial study by the economist Emile Benoit made the unusual and counter-intuitive finding that there was a positive, causal correlation between military expenditures and economic growth in poorer countries. Military spending, Benoit concluded, had a Keynesian fiscal effect on aggregate demand, generating positive multiplier effects. It created beneficial externalities for the civilian economy by

feeding, clothing, and housing a number of people who would otherwise have to be fed, housed, and clothed by the civilian economy-and sometimes doing so, especially in LDCs, in ways that involve sharply raising their nutritional and other consumption standards and expectations (Benoit 1978: 277).

Benoit's findings provoked a series of critical rejoinders in the coming years, in which the empirical validity of the results and their theoretical foundations were subject to vigorous challenge (Ball 1983, Faini et al 1984, Deger 1986). At about the same time, Paul Sweezy and Paul Baran's classic work on monopoly capital also saw a positive correlation between military spending and economic growth, although this argument primarily applied to mature capitalist economies. One of the key links posited by Sweezy and Baran is that millions of jobs are generated by military expenditure, and this, in turn, absorbs the reserve army of labour:

Some six or seven million workers, more than 9 per cent of the labor force, are now dependent for jobs on the arms budget. If military spending were reduced once again to pre-Second World War proportions, the nation's economy would return to a state of profound depression, characterised by unemployment rates of 15 per cent and up, such as prevailed during the 1930s (Baran and Sweezy 1966: 531).

This chapter deploys a modified version of what can be termed the ‘military fiscalism’ explanation used by Benoit, and Baran and Sweezy to the context of the relationship between economic development, political stability, and the civil war in Sri Lanka. In brief, it sets out an argument that the high levels of military expenditure associated with a prolonged civil war had a positive impact in addressing youth unemployment and rural poverty in some parts of the country.