2013 warfare state kellogg preprint libre

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Welfare State versus Warfare State:

Towards a comparative political economy of militarism in Canada and the U.S.

By Paul KelloggAssistant Professor, Centre for Interdisciplinary Studies

(M.A. Program in Integrated Studies, Athabasca University)Peace Hills Trust Tower, 1200, 10011 - 109 Street

Edmonton, AB Canada T5J [email protected]

May 1, 2013

Originally published inPolitical and Military Sociology: An Annual Review 41: 61-88http://www.pmsaronline.org

This version: Author-prepared pre-print

Example citation: Kellogg, Paul. 2013. Welfare State Vs. Warfare State: Toward a ComparativePolitical Economy of Militarism in Canada and the United States.Political and MilitarySociology: An Annual Review41: 6188.


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AbstractThe effects of the Great Recession were much worse in the United States than in Canada. This isnot a short-term aberration, but the result of long-term economic trends, shaped in part by thetwo countries different public policy orientations towards warfare and welfare. This articleexamines, with reference to Canada and the U.S., the way in which a sustained commitment to a

warfare state undermines social and economic development, public finances and corporateculture. A portion of this research was presented as a conference paper, The warfare state andeconomic decline: toward a comparative political economy of militarism in Canada and theU.S. at the annual conference of the Prairie Political Science Association (PPSA), September,University of Saskatchewan, Saskatoon, Canada.


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Introduction ..................................................................................................................................... 1The initial evidence ......................................................................................................................... 2

Figure 1: Measures of unemployment, Canada and the U.S., 2007-2012 .............................. 2Figure 2: The rise of the loonie (or the fall of the greenback), 2002-2012 ............................. 4

Figure 3: Military spending as a percent of GDP and Central Government expenditures,

Canada and the U.S., 1966-2011 ............................................................................................ 5Welfare, warfare and development ................................................................................................. 6Militarism and public finances ...................................................................................................... 12

Figure 4: U.S. Central Government Surplus/Deficit, as reported, and three scenarios, 1990-2012....................................................................................................................................... 13

Militarism and corporate culture ................................................................................................... 14Figure 5: Ratio of U.S. Commercial sales to Total Sales, Lockheed-Martin, 1993-2011 .... 16Figure 6: Boeing dependence on military sales, 1992-2011 ................................................. 17Figure 7: Top 100 Arms-Producing and Military Services Companies, 1988-2010 Sales,2010 U.S. Dollars .................................................................................................................. 18Figure 8: Top 100 Arms-Producing and Military Services Companies, 1988-2010

Dependency percentage, Arms sales relative to total sales ................................................... 20Conclusion .................................................................................................................................... 21References ..................................................................................................................................... 23


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The editors ofMacleans, Canadas most widely circulated weekly news magazine, opened 2012with a triumphalist front-page story On Top of the World, complete whose subhead contrasteda despondent United States and a crumbling Europe with Canadians who have never been

more confident about their future "#$%&' ()*(+ ,-.. This articulated a theme which has beengaining strength since the Great Recession of 2008-2009 a sense, reflected in the press of bothcountries, that Canada has somehow weathered that recession much better than has the UnitedStates. The Los Angeles Timeslisted healthcare, the deficit, unemployment, immigration andinteraction with the global economy as areas where Canada was outperforming the United States.(Lee 2010) The widely readHuffington Postran an article advising the US unemployed to head

north to look for work in Canada where hiring is booming and home prices are rising(McCarthy 2010). The Reputation Institute published the results of a survey which was trying toidentify the most reputable countries in the world. More than 40,000 consumers in the G8countries, were asked to assess the economy, the environment and the effectiveness ofgovernance in 50 major countries throughout the world (Burkitt 2010; Reputation Institute 2011,12 & 8). In terms of the first and third of these, Canada was ranked fourth. In terms of thesecond, it was ranked sixth. But overall, Canada was ranked first. Five of the other G7 countries Germany, Japan, Italy, the UK and France clustered from number 11 (Germany) to number18 (France) on the list. The United States was well down the list at number 23, behind Brazil,Greece and Portugal (2011, 14). Canada was ranked as the third most attractive economy inwhich to invest (behind only Switzerland and Japan), the most attractive as a country in which to

work. The United States was not in the top 10 in either category "()**+ */()..Here it will be suggested that there is more at play here than journalistic hubris and thefickleness of public opinion. There have been, in the two countries, divergent trajectories inpublic policy related to warfare and welfare, divergent trajectories which have had economiceffects. First, the article will examine some of the evidence indicating the different trajectories ofthe Canadian and the U.S. economies this century, as well as their quite different relationship togovernment arms spending. Second the article will review the literature on human development,highlighting the work of an early analyst, Ruth Leger Sivard, who was among the first tointimate a connection between warfare, welfare and development. Third the article will offerevidence to suggest the ways in which contemporary militarism has severely damaged publicfinances in the United States. Finally, the article will offer evidence to suggest the ways in whicha long-term over-emphasis on militarism can damage corporate culture. The argument will not,of course, be definitive. What is being outlined here are suggestions only, suggestions whichneed to be examined in much greater detail and at much greater length. But the suggestions, Ithink, are strong and point towards an important series of topics for 21 stcentury public policydiscussions.


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What is the evidence of a Canadian economy outperforming the one in the U.S.? One keyindicator is the different direction taken by the job markets before, during and after the GreatRecession in the two countries. Writing in 2012, one commentator observed that: total

employment in the United States is lower than it was a decade ago: growth from 2000 to 2008was wiped out by the Great Recession. By contrast, Canada saw strong employment growthuntil the recession, and recouped all subsequent net job losses within two years. Currently,employment is 18 percent above 2000 levels (Leonard 2012, 5). Figure 1 draws a picture ofunemployment rates in both countries from 2007 until early 2012, deploying multiple measuresof unemployment in the United States (not seasonally adjusted). There is the officially reportedrate, a rate called U-4 which tracks somewhat higher than the officially reported rate, as itincludes discouraged workers, and a rate called U-5 which expands the survey to includethose marginally attached to the workforce. The fourth line for the U.S., the U-6 figure,expands the universe again to include workers who want full-time work, but can only get part-time, which at the worse point of the recession hit the very high rate of 18%.

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(Original chart, created by the author, derived from Bureau of Labor Statistics 2013; StatisticsCanada 2012)

When Canadas rate of unemployment is contrasted with the official U.S. rate ofunemployment, there is a Canadian advantage, but it is not substantial. However, there is every


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reason to believe that the officially reported rate of unemployment in the U.S. severelyunderstates the actual state of the job market. It might well be that it is the very sobering U-5 andperhaps even U-6 figures which capture a more realistic picture of the U.S. job market.

Unemployment rates in the United States are artificially lowered in ways unique to theworld. The warfare state itself has the effect of masking unemployment. By the end of the

Reagan era and the New Cold War, 2.6 million civilian and military personnel were employedin the U.S. military machine. By 2000, just before 9/11, this total had decreased to 1.8 million.But with the Wars on Terror in the 21stcentury, the totals returned to just under 2 million(Defense Manpower Data Center 2012). This large standing army maintained by the U.S. is, infact, a kind of disguised unemployment. In addition, unemployment is hidden in the U.S. prisonand jail system. In 2002, the total incarcerated in the countrys prisons and jails, for the firsttime, went past the two million mark (Bureau of Justice Statistics 2003). By June 2006, the lastperiod for which complete data are publicly available, the total had risen to 2,245,189 (Bureau ofJustice Statistics 2008). The U.S. imprisons people at a far greater rate than any industrializedsociety. Its incarceration rate is almost five times higher than in Canada (International Centre forPrison Studies 2010). This has a real impact on unemployment statistics (Western and Beckett

1999, 1030). Were the U.S. to imprison people at the rate of Canada, at least one and a halfmillion people, who today are prisoners, would be added to the labour market in the hunt forjobs. Hundreds of thousands of prison employees would also find themselves out of work and onthe streets, since employment in the justice system has risen in lock step with the number ofprisoners. In 1982 there were just over 1.2 million employees in the United States justice system.By 1999, the figure was just shy of the 2.2 million mark (Bureau of Justice Statistics 2001). By2007 a total of 2.5 million persons were employed in the nations justice system, an increase of93% from 1982 (Bureau of Justice Statistics 2011, 3). The prison system in the U.S. has theeffect of reducing the unemployment rate by at least two percentage points, and possibly more.

There is a second, and quite striking indicator of relative Canadian economic health, ascompared to the United States and that is the divergent trajectories of their two currencies. Just10 years ago, one Canadian dollar could be purchased for between 60 and 65 cents. One loonie,in other words, was worth just 2/3 of one greenback. However, as Figure 2 highlights clearly,this has changed dramatically. The 21stcentury has witnessed an inexorable rise in the value ofthe loonie, relative to the greenback interrupted momentarily during the scariest moments ofthe recession, but only momentarily. We are now four years into a world where the twocurrencies exist more or less at parity, with the Canadian dollar frequently worth more than itsU.S. counterpart.


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(Original chart, created by the author, derived from OANDA 2013)

Finally, what are the two countries relationship to government-procurement of arms?

That there will be a difference, is not surprising. Almost half of all the worlds arms spending,done by governments, is carried out by the U.S. government, and this has been true for a verylong time. From 1988 until 2011, based on officially reported government arms spending, theproportion represented by the United States never fell below 35% and was frequently above43%. Since the launching of the war in Iraq in 2003, it has every year been above 40% of totalworld government arms spending, in 2011 $690 billion out of a world total of $1.6 trillion camefrom the United States (Derived from data available in Stockholm International Peace ResearchInstitute 2012a). This is worth spelling out. A country with less than 5% of the worldspopulation, accounts for more than 40% of total government arms spending.

Figure 3 contrasts this arms spending in the U.S. compared to Canada. Defense spendingas a percent of GDP is consistently higher in the U.S. than in Canada, hovering around the 5%

mark in the U.S., but never rising above 2% in Canada, from 1988 until 2010. More revealing isdefense spending as a percent of overall Central Government Expenditures. In the U.S., in theVietnam War era, defense spending consumed an enormous percentage of overall CentralGovernment Expenditures, peaking at the extremely high figure of 46% in 1968. In the Clintonera, defense spending declined somewhat to just 16.23% of Central Government Expenditures in1998. But through Bush and then Obama, it has returned to stay consistently at the 20% level. InCanada, by contrast, defense spending has never been anywhere near as high as in the U.S. as a


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percent of Central Government Expenditures, throughout the entire period being roughly one-third the U.S. figure.

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Now that we have presented the initial evidence, we can begin exploring the possibility of a linkbetween these two facts divergent economic performance, and a different, relative,commitment to a warfare state compared to a welfare state. A good place to begin, is in the U.S.

literature focused on arms spending where some of the earliest, careful attention was paid tocomparative developmental standing in the world system, indicating the negative impact ofprolonged maintenance of a warfare state, and suggesting the economic importance of spendingon health, education and welfare the welfare state. The United States Arms Control andDisarmament Agency (ACDA), publishes an annual report on arms expenditures, World militaryexpenditures and arms transfers. The history of these reports dates back to 1964, when RuthLeger Sivard was in charge of international economic studies at the Arms Control andDisarmament Agency. Sivard would become known for her annual report, World Military andSocial Expenditures, published from 1974 to 1996, the first publicly available comparison ofmilitary and social spending by world governments (J. Sivard 2011b). Sivard, a sociologist aswell as an economist, was among the first, through these reports, to identify a negative co-

relation between arms spending and social and economic growth as well as its reverse, apositive co-relation between social spending (on education and healthcare in particular) andeconomic growth.

Sivards story is remarkable. The ACDA reports published under her watch from 1966until 1972, included not only data on military spending (the warfare state), but also spending onhealth, education and foreign aid, a rough proxy for what we are calling here the welfare state.This ended in 1973, when ACDA decided to restrict the data presented to only expenditures onthe military. This decision did not come out of a void, but resulted from pressure, against Sivard,brought to bear by the Department of Defense. In a memorandum addressed to the President ofthe United States, the Defense Secretary emphasized that the comparisons shown in the reportmade it difficult for him to obtain congressional approval for the provisional budget prepared by

his department (J. Sivard 2011a). Rather than preside over a one-dimensional report, Sivardresigned, and continued to prepare her report as a private citizen.

Sivard was an absolute pioneer in this field, and her reports are indispensable on twofronts. First and this was what cost her a career in the State department she noticed anddocumented that arms spending undermines social and economic development. Second, throughthe 1980s and 1990s, as Sivards annual reports grew in scope and depth, she developed aframework by which to measure development, a framework ahead of its time as an alternative tothe meager GDP per capita which is the norm in cross-country comparisons. Her "economicand social" ranking for the nations of the world was based on "average of ranks for GNP percapita, education, and health (R. L. Sivard 1988, n2, p.50). From these three, she developed amethod to arrive at a single figure for each nation to summarize its rank among all nations in

economic-social indicators The ranking method makes it possible to combine a variety ofindicators. [T]he indicators chosen for education and health represent both input of nationaleffort (e.g. public expenditures, teachers) and output (e.g. literacy, infant mortality). Input factorsgive credit for effort, which will determine social progress but may not yet show in slower-actingindicators of results (R. L. Sivard 1988, 57).

This is a profoundly simple, and profoundly revolutionary approach. What could be morebasic, as measures of human development, than outputs such as literacy and infant mortality?An illiterate society with high infant mortality is clearly a much less desirable place in which to


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live, than a literate society with low infant mortality. Following this logic, government policyinputs which help create these outputs among them, public spending on healthcare andeducation become highlighted as tools for social advancement. And if these co-relate withactual economic wealth GDP per capita then a very clear set of priorities emerges whichgovernments need to follow should they (as all claim to) desire to promote the social and

economic advancement of their people. Similar policy directions are clear if, added into this mix,is the observation that high levels of government arms spending comprise a very negative input an input which tends to squeeze out the very social welfare spending which is not just socially,but economically, desirable. Is it any wonder that Sivard could not co-exist with the Pentagon inthe United States?

Employing this concept of development, it is very instructive to note the gradual changein Sivard's ranking of Canada, captured in Table 1.


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Since 1990, there has existed, through the United Nations, the new standard by whichcomparative social and economic development is measured. TheHuman Development Reportpublished annually since 1990 by the United Nations Development Programme (UNDP) hassupplanted all others as a guide by which to measure a countrys relative standing in the world.And, if imitation is the highest form of flattery, then the UNDP is giving very high praise indeed

to Ruth Leger Sivard. It has, in effect, adopted a modified version of the framework she began todevelop in the mid-1970s.The UNDP views on development were expounded in detail in the first issue of their

report in 1990. "People" they argue "are the real wealth of a nation. The basic objective ofdevelopment is to create an enabling environment for people to enjoy long, healthy and creativelives" (United Nations Development Programme 1990, 9). The shorthand used in the report isthat "human development is a process of enlarging people's choices" (1990, 10). This is a verybig step beyond simple GDP per capita figures. Put in philosophic terms (and paraphrasingHegel), it means striving for an economic situation where the realm of necessity has beenminimized opening up the possibility of maximizing the realm of freedom. In the hierarchy ofnational economies revealed by any study of the world economy, for those at the bottom of the

hierarchy, the realm of necessity impinges on everything. The scope for either individual orgovernmental choice is restricted indeed. For those at the top of the hierarchy, the realm offreedom is somewhat (or in fact a great deal) enlarged. However and this is the key point there is nothing automatic about the use that is made by the rich states of the "realm of freedom"inherited from the development of the past. That realm of freedom has been used in some states(the United States for example) to build up the warfare state. Others have used it to build up awelfare state. The UNDP report is much less explicitly politically charged than Sivards annualreport. It rarely draws out the negative co-relation between warfare and social development. Butfor those with eyes to see, it is embedded in every one of their charts, and in particular with theway in which particular societies are profiled in their figures.

Mahboub ul Haq, a prominent economist from Pakistan who initiated the HumanDevelopment Report, has identified four phases in the modern attempt to link economic statisticswith measures of development. The first phase saw income as a sufficient indicator ofdevelopment. "Pigou ... described economic welfare as the measurable part of human welfare the part that could be brought into a relationship with 'the measuring rod of money'" (UnitedNations Development Programme 1990, 104). Donald McGranahan was one of many voices thatbegan to argue that income was insufficient as an indicator of development. The new conceptwas one of "socio-economic development" where gross economic statistics were combined withother indicators like mortality, literacy and urbanization (McGranahan, Pizarro, and Richard1985). M.D. Morris refined this with a Physical Quality of Life Index, focusing on threeindicators, infant mortality, life expectancy at age one and literacy (Morris 1979). It was on thisbasis that the notion of development as the maximization of human choices was settled on in theHuman Development Report. It is related but not restricted to economic data. It attempts to linkoverall economic performance with the way this has been translated into the "development" of asociety's ability to improve key aspects of the quality of human life. This approach is completelyin sync with that of Sivard.

So how can you quantify the process of enlarging people's choices"? To measure thesechoices, the UNDP has included those critical areas for which figures are available (lifeexpectancy, education, access to resources, etc.) and excluded those which, while important, areharder to quantify (political freedom and human rights being the two most important) (The


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Economist 1990). This makes it less comprehensive than a study which tried to incorporate theseimportant variables, but quite relevant to the argument being developed here.

To measure development by its criteria, the UNDP selected the 130 countries which hada population of more than one million. It then calculated a "human development index" (HDI)which combines purchasing power, life expectancy and literacy. The UNDP method has one

principal disadvantage when compared with Sivard's. Sivard does not just focus on outputs(high levels of literacy, low levels of infant mortality), but also indicates the importance ofinputs (government spending on health care and education). Sivards method more forcefullysuggests policy direction for states to follow, than does the UNDP. Nonetheless, the UNDPfigures are interesting. Table 2 reproduces the rankings for the top 20 countries published in1990, the first year of the report. "The table ranks the countries in ... order of their score on thehuman-development index. The UNDP's researchers combined the first three columns in eachpart of the table showing life expectancy, adult literacy and purchasing power to deduce the[Human Development Index]" (The Economist 1990, 81). The United States, second in terms ofGross National Product per capita, slips to 19th place in terms of overall development. Canada,seventh in terms of GNP per capita, rises to fifth place in terms of overall development.


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Life Real GDP Human

Country Rank by expectanc per head Development

rank GNP at birth (PPP-adj'd) Index

by HDI per head (years) 1987, U.S.$ (HDI)

1. Japan 5 78 13,135 0.996

2. Sweden 6 77 13,780 0.987

3. Switzerland 1 77 15,403 0.986

4. Holland 14 77 12,661 0.984

5. Canada 7 77 16,375 0.983

6. Norway 3 77 15,940 0.983

7. Australia 17 76 11,782 0.978

8. France 12 76 13,961 0.974

9. Denmark 8 76 15,119 0.971

10. Britain 18 76 12,270 0.970

11. Finland 10 75 12,795 0.967

12. W. Germany 11 75 14,730 0.967

13. New Zealand 22 75 10,541 0.966

14. Italy 19 76 10,682 0.966

15. Belgium 15 75 13,140 0.966

16. Spain 24 77 8,989 0.965

17. Ireland 25 74 8,566 0.961

18. Austria 13 74 12,386 0.961

19. U.S.A 2 76 17,615 0.961

20. Israel 23 76 9,182 0.957

(The Economist 1990; United Nations Development Programme 1990)

In the years since, Canada has maintained a consistently high development rankingaccording to the UNDP. Only three countries the United States, Japan and Canada have beenconsistently ranked in the top 10 since the report began gathering figures. On average, the U.S.has been ranked as the seventh highest among these high human development countries butnever ranked first. Japan on average has been ranked sixth, and four times (in the late 1980s andearly 1990s) was ranked first. Canada has a better performance than both, having an averageranking of third in the category of high human development and on eight separate occasionsbeing ranked first, more than any country except Norway (which has been ranked first ninetimes) (United Nations Development Programme 2012).

The suggestion explicitly from Sivard, and implicitly from the UNDP, is that the twodifferent policy tracks need to be seen not simply in terms of foreign and/or social policy, but interms of their differential developmental impact. The evidence is building, that a prolonged biasin public policy towards a warfare state, seriously undermines key sections of the economy.There can be short-term stimulus effects, but in the long-term through squeezing out other


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non-military sectors the economy suffers. By contrast, a public policy approach biased towardsthe welfare state, can have important positive economic spinoffs, in particular through makingpossible the devotion of public resources towards health, education and welfare to sustain theflexible, healthy and well-educated workforce, increasingly central to the emerging knowledgeeconomy of the 21st century.

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One reason that a heavy commitment to militarism creates pressures to squeeze out spending onwelfare, is because of the way in which militarism directly damages government finances. Figure4 documents the trajectory of the central government deficit (and sometimes surplus) in the U.S.since 1990. The line deficit as reported shows the last twenty-two years of central governmentspending, a story of only momentary surpluses and a norm of deficits in the hundreds ofbillions of dollars in 2009 and 2010 in the wake of the financial crisis, passing the one trilliondollar mark.1

1Figures here are primarily derived from the Budget of the U.S. Government (Office ofManagement and Budget (OMB) 2012). For the years 2001 to 2010, the charts are based onfigures in Office of the Under Secretary of Defense (Comptroller) (2012). The latter differslightly from the former, but have the advantage of explicitly incorporating the military portionof the War on Terror, euphemistically referred to as Overseas Contingency Operations.


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Afghanistan and Iraq disappear from history. When this military spending is removed (ScenarioII on Figure 4), the picture of the U.S. central government budget is completely different. In2009 and 2010 there are of course quite large deficits. This is the normal Keynesian turn todeficit spending that occurs in any economic downturn. What is remarkable however, is the factthat in terms of non-military spending, before 2009 and 2010, there would have been no deficit

whatsoever. In fact in many years there would have been surpluses, including in 2007, the yearbefore the Great Recession.And in fact, this understates the situation. Many of the costs of the U.S. war budget are

hidden. It would take a team of forensic accountants with unlimited time and unlimited funds tosort through government finances and corporate balance sheets to tease out the actual costs ofsustaining the worlds biggest military, and the worlds only truly global empire. But there arethree non-defense line items that we can say with certainty are directly related to the U.S.military. First, Veterans Affairs spending is extremely high in the U.S. precisely because somany young people have come back maimed and broken through U.S. military operationsabroad. Second, the space program is a deeply militarized portion of the budget, an essential partof the development and testing of rocket technology that is the backbone of the U.S. nuclear

arsenal. We know, for instance, that the first explorative space missions employed hardwareoriginally developed for military purposes and that military requirements often still provide thecatalyst for space exploration (Webb 2001, 18). Finally, a significant proportion of the budgetof the Department of Energy is spent on nuclear weapons activities (Isenberg 2007, 1). Whenthese three are factored in (Scenario III on Figure 4), the picture is breathtakingly clear. With abudget history for the last 20 years resembling this graph, a pacific U.S. government could havespent billions on its stimulus package, without borrowing a dime. Stimulus could have beencompletely financed out of accumulated surpluses from the last 20 years.

What has been presented here is just a sketch, but it suggests strongly that the U.S.central government deficit problem has been in large part created by its unusually largecommitment to arms spending. Above this article contrasted defense spending in the U.S. withthat of the Canadian government, and showed that the U.S. central government has for a longtime been the center of military expenditure in the world as a whole. This huge infrastructure ofplanes, missiles, bases, tanks, guns, ammunition and personnel, sustained by this expenditure, isa principal reason for the desperate fiscal weakness of the U.S. central government. Critics willsay that it is inconceivable to completely eliminate defense spending in the United States,something that happens nowhere in the world. Fair enough. So reduce U.S. arms spending tosomething reasonable. Instead of 45% of the worlds total spending, a reasonable sum might befive per cent, as the U.S. population is roughly five per cent of the worlds entire population. Dothat, and virtually the same picture will emerge. Public finances in the United States have beenseverely damaged by a long-term commitment to militarism.

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There is another pernicious manner by which a Warfare State builds distortions into economicdevelopment the creation of a corporate culture that is increasingly dependent for survival upongovernment military contracts. The fact that demand in the U.S. has been sustained through hugegovernment contracts for military production, has qualitatively distorted the U.S. economy intoan economy that is increasingly reliant on those contracts.


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Begin with Lockheed-Martin made famous inBowling for Columbine, where MichaelMoore identified the company as the worlds biggest weapons maker. In 2010, the labor of thecorporations 132,000 employees resulted in almost $3 billion in profits. Those profits camefrom sales of almost $46 billion, $36 billion of which were identified by SIPRI as coming frommilitary production. We can capture a corporations dependence on arms production, by

expressing its arms sales as a percent of total sales. For Lockheed-Martin, its arms-productiondependency is an extremely high 78% "012$3'4 56%51%62738+ 9&'7:&9 ;'3< =235>$3%

2013 warfare state kellogg preprint libre

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