The Alchemy of Military Expenditure

There may be a charitable way to interpret the following Wall Street Journal statement in a report on Mr. Putin’s replacement of his defense minister (“Russia’s Putin Replaces Defense Minister in Security Shake-Up,” May 12, 2014):

Military spending, which has surged to over 6% of gross domestic product this year, up from 2.6% before the war, has fueled much of the country’s economic growth, helping it weather the impact of Western sanctions. Factories producing shells and tanks have been working in multiple shifts to cope, boosting employment and wages.

The Russian government’s propaganda makes similar claims.

Outside of pure propaganda, which of course we cannot suspect the WSJ of, the most obvious interpretation is Keynesianism with a vengeance: increased military expenditures and the destruction of military capital goods (and soldiers) are supposed to fuel economic growth compared to what it would otherwise be. We might wonder, then, why the military expenditures of the North Korean ruler don’t fuel high economic growth there. And suppose that instead of 6% of the Russian GDP, the government had spent 100% of it on military pursuits, that is, had devoted all the resources of the country to war and preparation for war, wouldn’t even more economic growth have resulted? I explored the mystery of this alchemy in another EconLog post, “SGZ as a Recipe for Economic Growth.”

That the new Russian defense minister, Andrei Belousov, is presented as an economist adds an ingredient to the alchemical mixture. According to Reuters, Belousov graduated from the Faculty of Economics of Moscow State University in 1981. Anyone may claim to be an economist—it is fortunately not a professional title that needs government certification, at least in free countries—but a degree from a Moscow state university in communist times does not constitute the best bona fide proof of mastery of the tools of economic analysis. As I suggested before, an economist who takes economics seriously could not last long in the service of a totalitarian state; and Belousov is a long-serving apparatchik.

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A caveat on the featured image of this post, the work of DALL-E and your humble blogger: it suggests that economics is a matter of money, which it is not.

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