But the new military Keynesianism is based on a delusion. It refuses to confront the fact that defence spending is, in strictly economic terms, one of the very worst ways to promote broad industrial rejuvenation. The growth multipliers are weak and the long-term productivity gains are non-existent. Unlike, say, investment in large-scale capital projects, building things, creating new fixed assets in energy, transport or digital infrastructure, there’s little diffusion of defence spending through the wider economy. While the construction of new roads, power stations or tram networks might provide decades of cheaper inputs, rearmament has a severe opportunity cost. An arms factory might create demand for steel and provide jobs for workers in much the same way as a high-speed rail link — but the former produces few positive spillovers, while the latter can regenerate whole regions. Rather than building the lifeblood of work, jobs and economic activity for the next century, in short, this khaki-clad Keynesianism sacrifices domestic prosperity for a real or perceived threat from without, or else because of an illusory attachment to the idea of Britain as a “global player”.
In truth, building and maintaining a world-class military exists downstream of a serious level of industrial capacity that Britain now sorely lacks. In the days of Bevin and Glubb, Britain built over half the world’s exported cars. Today it’s around 4%. In the aftermath of the Second World War, the UK was second only to the US in its steel production. Today, it manufactures less than Iran and Brazil, not enough to satisfy even half our own national demand. For all Labour’s rhetoric about a manufacturing renaissance, we simply don’t have the basic foundations of a durable industrial ecosystem: steel production; petrochemicals; plastics and advanced materials; energy independence and abundance; and a self-reliant productive base that isn’t subject to the whims of international oil shocks or geopolitical wrangling.
– Jonny Ball writing What the Anglo-Gaullists get wrong
Ah, yes. Jonny Ball. Written exactly like someone who’s never used a microwave, aerospace quality aluminum, or a cell phone.
The reason that we invest in military industry is not because you’re going to hand out JDAMs to everyone on the street. Though as an American, I point out that would probably be a better solution than whatever you’re doing now.
The reason that we invest in industrial production of military equipment is because those things are the cutting edge of technology. The easier and cheaper they become to make, the more we have that technology end up in your pocket, making your life better.
The fact that you can also point to how cool all of it is because it blows up people that want to kill you or intends to is really just gravy.
Yes, you need a world-class industry to have a world-class military, but no factory gets built in the absence of a demand. I know the Brits have long had a problem with the concept of supply and demand as an economic theory, but it exists. Create the demand via one of the few mechanisms which pretty much everyone agrees governments are free to invest in, militaries. Production comes after, along with all the people getting jobs and more importantly training on how to run those factories who will then want to go run other factories to make more money for themselves. This is how you have an industry. This is also how Britain no longer really has an industry. They gave up on that idea.
How’s that turned out for you?
In reality, Mr. Williams, UK military orders will get filled either from overseas or by companies using imported materials & components, which is the point the article is making as we’ve hollowed out the underpinning base. By the time that base has been rebuilt, presumably starting in 2029, we’ll be starting from an even lower base that depends on sunshine, wind, and unicorn farts.
“We don’t need to re-industrialize and build weapons – Russia couldn’t even beat Ukraine!” seems . . . optimistic.
@AlexanderWilliams, if you throw around enough money eventually something useful will get done. This is the basis of all government spending, it isn’t really targeted at useful things, it is targeted at “get me re-elected”, and “keep government budgets high” things. But there are floods of money so something good usually gets done by accident.
If instead we had spent all that military money on industrial R&D and manufacturing we would have had a massively larger ROI than we do from the military, which is to say we’d eventually have microwaves, but also lots of other ideas that were never invented due to lack of capital. This is called opportunity cost.
One thing the military does is keeps the country safe from foreign invasion and that is a necessary foundation for a functional economy. So that is the “spill over” from military spending. Of course politics goes on the poison that freedom bought in the blood of young men, but that is a whole other story. When one compares Britain to the United States and to France it seems obvious that France needs to spend way more than America because they have, historically, been invaded all the time. And Britain is somewhere in the middle, not invaded too much but WAY easier to invade than America. The only serious existential threat to America are ICBMs, and for some reason that is the one place America does not spend mountains of money.
There is also an argument for a Navy to ensure freedom of trade. And the Royal Navy used to rule the waves. Now it is nothing short of an embarrassment. But on the flip side, why bother with a British Navy when our colonial cousins are apparently willing to do all the work. At least until they say “hey, WTF”, which I, as an American tax payer, am saying a lot these days.
I’m not an uncritical fan of Jonny Ball but Alexander Williams does put the cart before the horse. US industrial power right before WW2 very notably did not develop as a consequence of servicing orders for the US military, the US military was able to expand rapidly in WW2 because the infrastructure was already there.
While I agree with the broad thrust of the article, namely that freedom → prosperity → power and not the other way round (not that the “Anglo-Gaullists” have the last bit in mind) I have to object to this:
Time for a little Bastiat here. While a modern high-speed rail link might indeed benefit those near the stations what matters is the unseen: the projects that would have happened elsewhere if the money hadn’t been stolen by the government. In the days when Britain was a great power railway finance was a voluntary activity.
@Patrick,
“the projects that would have happened elsewhere if the money hadn’t been …. ”
I completely concur that it’s almost always vastly worse if it’s taxpayers’ money mediated via Government, but Bastiat applies no matter whose money is deployed.
If the project is a white elephant, those private investors could have put their money to better use and we would be better off as a result.
Alexander,
These things are not cool because of the reasons you state (basically killing baddies) but because they just are intinsically cool. They are way cooler than The Fonze.I only really got this when I went to Duxford with my wife a few years back. She looked at an SR-71 and said, “But they can’t build anything like that yet!”. There followed a (short) lecture about Kelly Johnson and the Skunkworks.
What’s really cool about the SR-71 is not that it flew at Mach 3+[CLASSIFIED] and evaded over 4000 missiles but that it was made from titanium from the USSR that the CIA acquired by “means”. And only the US had (at the time) the ability to cold-forge titanium. Just that last bit sounds like the work of Telchar of Nogtod… Now that is cool. That is way cooler than funding a transgender refugee group.
What’s really cool about the SR-71 is not that it flew at Mach 3+[CLASSIFIED]
3.43
Poor sad non-industrial Britain builds most of the Formula One cars, engines and gearboxes. That is the kind of industrial base you need for weapons. Britain is sending drones to Ukraine. A country which uses commercial drones and bits and pieces to beat a badly-run conventional army. Which has driven the Russian navy from the Black Sea without having much of a navy at all. The rules have changed. Are still changing. There is no reason to think that what was necessary in 1939 has any overarching relevance today. The OPs argument is flawed. Led on mostly by wishful thinking and disdain for the military. Encouraged by ignorance.
Anyhow, when we are talking of threats of invasion you’d have to be pretty unobservant to miss that the invasion is ongoing, the threat lives here already.
I am. I loved Think of a Number and his daughter was one of the prime hotties of the 90s. And still lovely today. Astoundingly, she is 55. Lordy.
@NickM
These things are not cool because of the reasons you state (basically killing baddies) but because they just are intinsically cool.
Maybe, but private industry builds things that are incredibly cool too, and don’t kill people collaterally. You can get a lot more cool stuff by leaving the money with private industry than you can pissing it away in the suffocating bureaucracy of the Department of War.
Take, for example, Starship v3, which is going to be launched in the next week or so. They just did a static test fire of this rocket, and while it was firing it used more power than the three times amount of power generation in the whole of country of Britain, approximately. Now that is cool. Or consider a new OTA update Tesla just did to their cars. This update uses the cameras to detect when a major accident is about to happen and deploys the airbags and seat restraints, meaning they are deployed intelligently rather than by accelerometer nearly a tenth of a second earlier, a change which dramatically improves the survivability of auto crashes. Check out the animated graph in that X article I linked. And they made this change with an OTA update. Now that is insanely cool.
Of course these sorts of things happen all over American industry, but I am a fan of Musk so have a lot of visibility into the crazy balls things those companies are doing. Do we really think that taxing them and running the money through the utterly incompetent government bureaucracy is going to get a better result for the American people? The reason why Lockeed Martin has a Skunkworks program is to precisely avoid that type of bureaucracy at the corporate level. Imagine how much worse it is at the government level.
Fraserm
I agree. I still think combat aircraft are cool but you make some good points especially about the bureacracy. The UK’s RN has more admirals than ships! God knows what they do? As to private industry… Well… We are talking about this on a blog aren’t we. I’m using an ASUS Zenbook 14. Dunno about you but I’ll bet my sweet ASUS neither of the devices we’re using could even have been conceived, let alone built by government.
@NickM
neither of the devices we’re using could even have been conceived, let alone built by government.
Many years ago I was a contractor for the Royal Navy writing software for sub hunting, actually we were writing the training software to teach cadets how to use the actual software. On the actual tool used in the helicopters we discovered there was a spelling mistake on one of the screens. They wanted it fixed right away. Because of the bureaucracy it took 8 months to deliver that one change. They also used this keyboard in the helicopters for controlling the system. They must have weighed 40lbs, and were these ugly hard to use membrane keyboards and an even harder to use trackball. Each one cost the Navy £5,000, and this was in the mid 1990s. I pointed out they could keep a stock of five regular keyboards that would weigh less, take up less space, be more reliable and be easier to use even with gloves, for a tenth of the price. “That’s not the way the MOD works” I was assured.
FWIW, though, talking of cool, it was one of the coolest jobs I ever did.
Socialism makes Europe unattractive to investors, and unable to innovate quickly.
It is already in a financial hole. Nobody wants to cut the benefits, even those who understand that they are problematic/uncompetitive.
In this context government military spending (instead of waiting for inventors and investors who may never appear) is a pretty viable way to stimulate restoration of industrial research and manufacturing activity.
@Ben David
Socialism makes Europe unattractive to investors, and unable to innovate quickly.
I don’t think people realize how impactful this is. If you look at the history of GDP in Europe and USA the difference is remarkable. Remembering that the EU has about 30% more people, in 2000 the EU and the US had roughly the same GDP, today the USA’s GDP is over 50% higher. And that is in sclerotic America, still outstripping myocardial infarction Europe. If you instead compare to a much freer market like Singapore GDP there has increased by 420% in the same 23 year timeframe.
It is also worth remembering that GDP includes government spending (excluding transfer payments). So the bigger the government the higher the GDP, which is an utterly bizarre measure of the productivity of a nation.
It is also worth pointing out that none of this matters much anymore, since we are in the middle of an technological revolution that will make all of this seem utterly meaningless.
No, military spending does not usually drive innovation in general. I’ve worked on a couple of fairly advanced military projects and one common factor was the obsolescence programme. Military system design cycles are so long that what was the cutting edge technology at the start is obsolescent and becoming unavailable before the thing goes into service and production has to ramp up, so you have to start looking for workarounds.
That said, Fraser Orr mentions keeping the country safe from foreign invasion. That is vital, and the sole point of the military; otherwise, it is simply a cost. As for getting foreigners to do that for you, whether directly or as your arms supplier, that’s fine until you find yourself in a war against one of your supplier’s friends. So, we need industry – both heavy and hi-tech – and in the meantime (hopefully, starting post 2029) we need to rebuild the armed forces to the point they can make use of the output. Maybe start by demoting most of those admirals to lieutenant-commander or so and giving them seagoing appointments in command of whatever ships can be scraped up, reactivated from reserve, converted from merchant vessels etc..
More government spending is NOT the way to rebuild industry.
More military spending may be better than more welfare and public services spending – but most-of the people who are supporting more military spending are NOT suggesting cuts in benefits spending, or NHS spending – they are just asking for more government spending.
I am sorry (very sorry), but the United Kingdom can not afford more military spending – we are drowning in Red Ink already.
Of course, if people come up with large scale (large scale) cuts in non military government spending – then the situation will have changed, but I seen no sign of that.
Cause and effect is important. Nelson’s navy in the early 19th Century was starting to see the effects of the Industrial Revolution, such as new ways to smelt iron and steel and produce cannons, and carronades. Demand for stuff fuelled new ideas, and some of that spilled over into civilian life. However, there is the opportunity cost: all those men press-ganged into ships where they had to endure floggings and lousy food and risk of dying in action; or the resources used to man large fleets could have been used for something else.
Sometimes military spending can generate a need for innovation, but it is a toss-up as to whether civilian spending can do this just as effectively. For example, the engineer Henry Maudsley, who invented many machine tools, was a key figure. He spent time working at the Royal Foundry, where weapons got made and were early examples of high-tech and precision engineering, but my guess is that other, less warlike technologies would have also benefited. The merchant navies needed accurate clocks and equipment, just as a “man-o-war” did, etc.
I recall reading an opportunity cost of the Apollo Moon landings (and I am an unreconstructed space cadet) were all the space-faring technologies that did not, to make a pun, get off the launchpad.
I cannot afford my car insurance if I spend all of my money on chocolate.
bobby b – as I said, if people come up with ideas for real reductions in government spending, then there might be more money for the military.
But cutting health care spending, and care for the old and poor (and this is where most of the money goes) is a bit different from “spending the money on chocolate”.
Every so often the press claim that people on welfare get tens of thousands of Pounds a year – but I have never met anyone like that, and the Food Banks are not short of people begging for food, and NO most of them are NOT on drugs.
Over time the state has taken over the functions of civil society – of religious and secular mutual aid societies, (and traditional families have also been undermined – by both economic and social, cultural, policies) this has been a disaster.
And the disaster is only just starting – it is all going to get worse, vastly worse.
It may, perhaps (perhaps), be that people who find the courage should take what is (falsely) called “the coward’s way out” – as what is coming is going to be terrible. Sadly I doubt I will find the courage to stop clinging to life – till life is ripped from me.
But, no, people no longer buying chocolate is not going to make any difference.
As for the British armed forces – they are not going to get any better, rather the opposite.
Ah yes Alexander, the utility of the LCS certainly has advanced technology in the civilaim world. And those JDAMS certainly led to a mighty US industrial capacoty. Europe rebuilt industry post-WWII with a strong civilian export focus, not military Keynesianism. Britain’s military spending as % of GDP has consistently hit NATO’s 2% target, but industry still shrank.