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Monopoly Capital, Organized Labor, and Military Expenditures in the United States, 1949-1976

In this paper we systematically assess the neo-Marxian view that military expenditures are used by the state as a countercyclical fiscal policy either to forestall a serious recession or to facilitate economic recovery. In particular, we examine the post-World War II political-economic experience of the United States, because the military expenditures thesis was most fully developed initially in an attempt to explain postwar American prosperity. We evaluate what we term the "naive" model of Baran and Sweezy, which suggests that the degree to which national output is absorbed by military spending should be dependent on aggregate economic conditions such as unemployment. Finding only inconsistent evidence to support the naive view, we incorporate the insights of recent neo-Marxists (especially O'Connor) on the linkages among the monopoly corporate sector, the unionized sector of labor, and the state. The empirical evidence appears consistent with this "modified" view, with unemployment in the unionized sector and rate of growth of monopoly profits significantly affecting variation in military expenditures as a percentage of GNP during the postwar period. We then introduce a variety of controls in an attempt to determine if our results are simply statistical artifacts of equation specification, of time dependence, of estimation procedures, or of measurement strategy. Despite a multitude of such checks, we find that our results remain statistically significant and in the predicted direction. We do find, however, that additional economic (i.e., concentration) and political (i.e., the electoral cycle) variables also affect military spending.