Economy as an ally of security

OPINION:

It is commonplace to overlook our economy’s importance. So it should not be surprising that the economy’s role in America’s security is virtually invisible.

Yet, as economies have grown, their role in war has increased apace. Wars in the final extremity are now fought as much by economies as by armies. It is no coincidence that America is preeminent in both. Recognizing this role only reinforces the economy’s national importance, elevating it beyond providing our livelihood to protecting our way of life.

The economic component of war has always existed. However, long gone are the summer campaigns that once accommodated the harvesting of crops. Since the Industrial Revolution, developed societies have become so wealthy and productive that war itself has become vastly more destructive and costly.

The last century’s two world wars’ devastation convinced developed nations that the increased ability to wage war has made it too costly to wage except in extremis. It is no coincidence that dictatorial regimes, then and now, have been the most willing and most able to force these costs on their nations.

The military aspect of the American economy is also not a recent development. Its global impact was felt as early as World War I, when America’s late entry proved decisive to the Allied victory. Still, that only offered a hint of its impact a generation later.

The military contribution of America’s economy in World War II was unmatched historically and overwhelming. Its early enlistment in the 1941 Lend-Lease program helped keep Britain and the Soviet Union in the war. Yet its full deployment did not come until America became an active combatant.

Putting our economy on a total war footing is unimaginable today. Rationing, price controls and war bonds all allowed the economy to be harnessed fully to America’s war effort. The result was staggering. Defense spending grew from 1.7 percent of gross domestic product in 1940 to 37½ percent in 1945 and averaged 32½ percent during the active war years (1942-45). And this dramatic increase occurred as the economy grew explosively — rising 59 percent from 1941 through 1945 — as a result of the military spending.

The United States produced more tanks than Germany, Japan and Britain combined; more machine guns, military aircraft, and surface military ships than any other country; and more military trucks and merchant shipping than all other countries combined. All this, despite being at war for a shorter period than the other major combatants.

This level of commitment largely pre-ordained the outcome. Certainly there were crucial battles (Midway, North Africa, Normandy) that — had America not won them — would have greatly prolonged the war and sacrifice. But so long as America’s level of commitment remained intact, even had these battles been lost, the Allied victory would only have been delayed.

The context of the past allows a full appreciation of the present. Today’s economy is vastly larger and more productive than America’s in World War II — removing inflation’s effect, it is 7 times larger in 2008 than in 1945. As a result, America has no military equal in the world. With troops in Afghanistan and Iraq, America spent just 4 percent of its GDP on national defense — the same as the 2004-07 average. Doing so has not produced an economic decline, a tax increase, or even a large deficit (2007’s 1.2 percent of GDP was half the 40-year average of 2.4 percent).

Despite what critics would have us believe, this is neither the Great Depression nor World War II. In fact, it is not even half the level of Korea or Vietnam either — when national defense spending averaged 8.6 percent of GDP from 1946 to 1973. The fact that it is none of these, underscores the economy’s enormous military impact.

Consuming just 4 percent of the economy, the U.S. twice obliterated a relatively well-equipped Iraqi army in a matter of days, while suffering few casualties, and destroyed the Taliban’s hold in Afghanistan, while achieving far greater pacification than the Soviets were ever able to.

The argument is advanced that in the War on Terror we do not face an opponent comparable to those of World War II — but one less developed, though no less committed or insidious.

However, this merely reinforces the point that no comparable opponent does exist. How many nations’ militaries could withstand America’s military commitment of just 4 percent of its economy? How many the World War II level of commitment, a level that now could be supplemented by access to global capital resources as well?

It is fashionable to downgrade the post-World War II Pax Americana. This despite the facts: There has been no World War III or even military conflicts between developed nations; enormous arsenals of nuclear weapons have been unused and vastly reduced; the Soviet Union has been dissolved and communism has seen its denouement globally; and many nations even have been sparred the cost of their own defense. A better course would be to ask why it exists. The answer is the “Economica Americana.”

We are very accustomed to asking our economy to shoulder all our societal costs and still denigrating its contribution. In truth, we are still likely underestimating its importance because we are unaccustomed to recognizing its role in our fundamental security.

This overlooked role further underscores the imperative that America retain its economic superiority. It is not hyperbole to say this economic superiority is not simply a question of dollars and cents but war or peace itself.

J.T. Young served in the Treasury Department and the Office of Management and Budget 2001-04 and as a congressional staff member 1987-2000.