Why the United States cannot achieve a positive balance in economic competitiveness

War has been and remains the most profitable industrial production and the most direct route of transferring tax money to industrial complexes involved in weapons production.

By Dr. Mehrdad Emadi*

The military spending of the United States in 2015 has been greater than that by China, Saudi Arabia, Russia, India, France, Japan, South Korea, Brazil, Italy, Australia, Iraq and Israel – combined.More than 23 years ago – together with two academic colleagues – Dr. John Bridge (then Principal Lecturer in Econometrics) and Dr. Barbara Emadi-Coffin (then Senior Lecturer in International Relations), we assessed effects of increased military expenditure on the competitiveness of the economy with special focus on trade competitiveness and innovation. The assessment, in addition to being presented at three European conferences was also published in the British Independent daily newspaper. We argued that that whenever military spending rises at the cost of reduced expenditure on education, private investment and R&D spending, the economy experiences declining competitiveness and saving. We further argued that research – both academic and commercial – suffers as a result of this. Our argument followed that there will be chronical growth of national debt and deficit in foreign trade. At the time our assessment was centred on the UK and US but we also looked at Germany and Japan.When we trace back the structural changes in the US from 1950 onwards, we can clearly witness the deep cracks in the competitiveness of the economy. Although the United States still has the most dynamic economy in creating added value and innovation – due to skewed allocation of military spending in the Federal budget – its ability to invest in infrastructure has fallen to less than one third of the average in Western Europe.

With a debt of over 15,999 trillion US dollars, the national debt of the US is more than the combined debt of Brazil, Venezuela, India, China, Colombia, Argentina, France, Italy, Spain, Turkey, Russia, Pakistan, Egypt, Iran, Algeria, Morocco, Namibia as well as Greece. 321 million US citizens must burden a higher debt than the 3,82 milliard citizens of the listed countries – or in other words have a per capita foreign debt twelve times greater than the population of these countries.

In my view, since Mr. Trump is in favour of increased military spending in NATO, this spending in the United States will be raised at a greater rate than in the last 10 years. This will add to the country’s national debt. As a result, I envisage a decrease in economic growth throughout the world as military spending will take away from access to capital needed for investment in productive activities. The existing economic and financial fragility of the United States of America is behind the readiness of the political leadership to create additional demand for products of military-industrial monopolies. The interest in creating new conflicts will achieve that while at the same time it will increase outside demand for American military hardware.

The investment of the federal government in projects centring on the production of military hardware has been 15 times that of infrastructural spending in the US. The production of each new generation of hardware requires their use and testing in war conditions and brings about the need to reduce stockpiled hardware, thus making a military confrontation the best option for emptying warehouses and placing new orders. The period of development and mass production is between 8-12 years for ground, 10-16 years for air and 12-16 years for naval forces. The period in between international conflicts in which the US has been involved, follows closely the development of the latest generation of hardware; although this is not the sole factor explaining how these conflicts are fuelled. Yet for the country’s ordinary citizens, the cost of these wars has hollowed the economy and industries of federal infrastructure investments. Viewing the military spending of the US from prior to the Second World War, points to the evident connection of federal foreign debt and the military costs of foreign conflict.

The cost of war

Korea: 30 milliard dollars at the rate of 1953 which amounts to 355 milliard dollars in 2016.

Vietnam: 173 milliard dollars at the rate of 1973, 770 milliard dollars at the rate of 2003 or 1,22 trillion dollars in 2016 With 2,1 trillion dollars at the rate of 2016 for total medical expenses.

Afghanistan, Iraq, Pakistan, Syria and Homeland Security, cost of 3,6 trillion dollars and 1,22 trillion dollars in new commitment of military orders, 4,8 trillion dollars with the total assessment of 7,255 trillion dollars. 2,1 trillion dollars investment in US industry will lead to renewable energy providing one hundred percent of its domestic consumption, result in 3,2 million new industrial jobs, rebuilding of 70% of roads, bridges and renewal of railroad as well as add 800.000 more federal teachers and bring labour productivity to be raised between 18-24% – empowering US industry to be far more competitive with that of Europe and Japan.

However, one billion dollars of military hardware can generate 8 times more profit than if spent on non-military goods.

War has been and remains the most profitable industrial production and the most direct route of transferring tax money to industrial complexes involved in weapons production.

Many of my assessments have proved to be incorrect. I Hope that so shall be this one. I would prefer that the outcomes are positive, even if I am envisaging a negative future. It is preferable to being proven right.

*Dr. Mehrdad Emadi is Senior Economist for risk analysis and energy derivatives markets consultancy & Senior Research Consultant


Why the United States cannot achieve a positive balance in economic competitivenessMehrdad Emadi*The military…

Posted by ‎Mehrdad Emadi مهرداد عمادی‎ on Dienstag, 31. Januar 2017