Money / Argument

The Permanent War Economy Doesn’t Benefit Workers

Advocates of “military Keynesianism” present it as a boon for the working class. In reality, it diverts resources away from social provision.

by Hanna Goldberg via Jacobin on June 23, 2025

...and 2008, found that military spending had a positive effect on profitability only up until the neoliberal era, when that relationship reversed. In a 2019 follow-up study, Elveren found no significant relationship between military expenditure and profitability between the 1980s and the early 2000s.

No Guarantees

The key point is that state investment in arms production may contribute to higher rates of profit across the economy, but only under certain circumstances. It is by no means guaranteed. Marxist economist Michael Roberts, in his review of Elveren’s 2019 book on military expenditure, put it succinctly: “In the great scheme of things, milex [military expenditure] is not decisive for the health of the capitalist economy.”

In fact, Roberts argues, following on from Paul Mattick’s critiques of the permanent arms economy thesis during the 1960s, state investment in arms production imperils the capitalist accumulation process by “restricting the volume of use values that can be employed for reproductive purposes.” This becomes especially problematic when an economy is descending into recession conditions, when capitalists are already loath to invest in production and likely to speculate or hoard.

While large-scale state investment in arms production during the early decades of the Cold War played a role in spurring growth and prosperity, continued military investment in the latter decades of the twentieth century and beyond may have accelerated economic decline. Between 2006 and 2010, for example, US military spending was on the rise in both absolute and relative terms, just as the broader economy spiraled into recession conditions.

War and war production in the neoliberal period have became increasingly technologically intensive. As such, this failure to cohere to the midcentury pattern may illustrate precisely Mandel’s critique of the permanent arms economy thesis: the contradictory effects of military expenditure and the higher-than-average composition of capital in arms-producing industries.

Theorists of the permanent arms economy envisioned a clear and unidirectional role for arms spending in propping up a new transmutation of the capitalist system. It was the key change in the postwar productive landscape, underwriting the unprecedented prosperity of the golden age of US capitalism.

Crucially, these theorists saw the permanent arms economy as an obvious political problem: by staving off crises and keeping employment high, this form of state investment essentially bought off the US working class, freezing class relations in place, and rendering null any possibility of revolutionary overthrow. Meanwhile, hostilities mounted at the international level, a global interimperialist arms race bringing the entire world closer to nuclear holocaust with each passing year.