The Modern Business of War

Sen and Durano, The Remaking of Social Contracts, Zedbooks, London, 2014, Chapter 3

14 Pages Posted: 26 Aug 2015

See all articles by Oscar Ugarteche

Oscar Ugarteche

Instituto de Investigaciones Económicas UNAM

Date Written: May 30, 2010

Abstract

Historically, it has been argued that war has been a solution to economic problems. In the Keynesian guns or butter curve, guns reactivated failing economies while consolidating their political power. This logic is the opposite of Bastiat’s (1850) broken window fallacy that argues that money spent on wars is not spent on something else so there is no greater economic good from war but only profit for those related directly to the business of war. We want to argue that from the turn of the XXIst century there is evidence that what is good for the military industrial complex seems not to be so for the US economy given that the greater the military expenditure, the greater both fiscal and external deficits become while GDP growth does not respond necessarily. The question is why not. The logic developed beneath can be taken to other leading economies in Europe that are following the same path although the analysis is centred in the US. In the end we want to demonstrate the militarisation of the economy and of social control as the result of mainstream economic policy and confirm Bastiat’s fallacy.

Keywords: Structure, Scope, and Performance of Government, National Security and War, International Public Goods, Portfolio Choice, Investment Decisions

JEL Classification: H11, H56, H87, G11

Suggested Citation

Ugarteche, Oscar, The Modern Business of War (May 30, 2010). Sen and Durano, The Remaking of Social Contracts, Zedbooks, London, 2014, Chapter 3, Available at SSRN: https://ssrn.com/abstract=2648727

Oscar Ugarteche (Contact Author)

Instituto de Investigaciones Económicas UNAM ( email )

Circuito Mario de la Cueva s/n
Ciudad Universitaria
México DF, 04510
Mexico
(5255) 5623 0100 ext 42422 (Phone)
(5255) 5623 0092 (Fax)

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