Art Carden  

Why Can't We Be More Like Europe? Military Spending Edition

Setting the Record Straight on... Henderson on Thaler and Sunste...

Why can't the US be more like Europe? Why can't we have decent economic growth and an extremely generous welfare state?

Here's one reason: we spend an enormous amount of money on the military. Wikipedia's "List of Countries by Military Expenditures Per Capita," US per-capita spending on the military of $2141 in 2009 was almost twice as much as Norway ($1,245) and close to three times as much as Denmark ($804), Finland ($702), and Sweden ($657).

But aren't we getting (and providing) a lot of peace and security in the process? I'm not so sure. In this LearnLiberty debate about war, co-blogger Bryan Caplan lays out his case for pacifism. He explains in previous EconLog posts here and here.

(The usual disclosure: I've been paid for appearing in LearnLiberty programs, but not for blogging about them. I'm sure there's payola in the blogosphere, but I'm not getting it.)

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COMMENTS (14 to date)
Pierre writes:

As a Canadian, I'd like to thank the US for providing us with an incredibly generous defense subsidy for the past 60 years.


Art Carden writes:

@Pierre: you gave us Tim Horton's and poutine, so we're close to even. I'll be happy to call it even once Tim Horton's opens a Birmingham location!

Lower US military spending might cause spending in other places to rise. I'd be interested in seeing whether the US is, in a sense, paying for other countries' welfare states by playing Globocop.

sam writes:

The difference between US military spending per cap and Scandinavian military spending per cap is not useful information.

Military spending is a small part of the GDP of both Scandinavia and the US.

The US also spends more on health care per cap than the Scandinavians, with much lower coverage and much lower results.

The US also spends more on education per cap than the Scandinavians (and nearly every other G20 nation, for that matter), with again, much worse results.

This is because the US government is uniquely incompetent amongst first world governments.

JLV writes:

We do have a natural experiment in in the 1990's for this. US Defense spending per capta fell from around $2200 to about $1400 between 1990 and 2000. spending in the former Soviet Union fell by at least as much, I would expect.

From a cursory look at the data, it does look like defense spending fell in the 1990s for most European NATO members, and increased in the 2000s.

Seems like even more evidence for cutting defense spending.

Taimyoboi writes:

According to Tyler Cowen, it's not just the peace and security you have to add to the benefits side of the ledger. It's also the economic advancements and incremental growth that may have come with it.

For example, if the internet can credibly be claimed to have resulted (even in part) from military spending, that's a significant benefit you're neglecting.

Fazal Majid writes:

According to The Economist this week, the US also spends half as much as Europe on infrastructure as a percentage of GDP. That's because most of it is paid for by the states, and public employees have done an amazing job of capturing state legislatures and ensuring most of their budgets are spent on salaries and pensions. A generation ago a California spent 25% of its budget on infrastructure vs. bupkis today.

Other sectors like health care, finance and the legal profession are way ahead of the military at sucking the lifeblood from the body politic.

Arthur_500 writes:

There is an excellent video on the Internet about the healthcare system in Sweden and why it might not work in the US. In short, there may be a cultural difference between the countries and the approach to healthcare. Sweden is much more homogenous than the US

Being GlobalCop has distinct advantages for the US as well as all the other countries that benefit from not having to pay for defense and not having to worry about being the next Ukraine. It enables other countries to sell products and build their economies, for example.

All this requires leadership that avoids conflicts and utilizes its military assets well. Alas, the US can improve greatly

Glen writes:

US economic growth has been comparable to or better than Europe (EU) for the past decade.

And we spend as much money on welfare as does Europe.

The real question should be: how do we afford outsized spending on defense and similar spending on welfare while maintaining similar or better economic growth as compared to the European Union?

Maybe because we have a slightly smaller and less intrusive government?

Chung Tang writes:

In the video, they are debating about if the interventions made by America are justified or not by using ideological approach and also benefit-cost analysis. I believe that the U.S. government makes large amount of investment in military is because they want to earn benefit in long-term through speculation that can outweigh the cost. However, I believe the future profit may not be foreseeable. It seems like the intervention cannot stop the terrorism but hurt the social benefit by spending even more resource on social security due to avoiding vengeance. People are always asking why America needs to possess the top military power in the world but sacrifice the public benefits on health care and welfare. Since the two largest source of U.S. government spending are defense and social security, which are military spending, the United States cannot have decent economic growth and an extremely generous welfare state due to the greatest economic problem.

Noah Carl writes:

BC writes:

Define "decent economic growth". My impression was that European growth was worse than that of the US. At least, they seem to have higher structural (non-recession) unemployment.

I do agree with Art's comment that lower US military spending might cause spending in other places to rise. However, I would interpret that relationship, if true, differently. If subsidizing European defense leads Europe to spend more on welfare and, if that relationship is generalizable to the US, then that suggests that US defense cuts wouldn't necessarily lead to less US government spending, just more welfare spending, i.e., defense spending crowds out primarily welfare, not the private sector. Then, US defense spending buys a global military monopoly and, to the extent that it pays "for other countries' welfare states", it does so primarily through less US welfare spending, not by diverting resources from the private sector.

Some people believe that welfare programs have at least some negative (albeit unintended) economic effects. If so, then military spending, apart from any security benefits, may in addition have positive effects on the domestic economy, not by creating broken windows to sweep up, but by reducing the number of broken windows created by welfare spending. I think this concept is in the spirit (of my understanding) of Tyler Cowen's argument: the threat of a foreign adversary can take away government's luxury of indulging various special interest groups' rent seeking.

The hierarchy of what motivates politicians and government bureaucrats may be something like: national security > indulging rent seekers to win votes > long-term economic prosperity. If so, then we may need the first to get the third.

Anonymous writes:

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Shane L writes:

The US government would presumably save a lot of money if it simply went to war less frequently. It could still maintain a large and modern military, but without rushing from crisis to crisis and getting involved. China's economic and political strength appears to have grown dramatically during a period of Chinese peace. Meanwhile the American interventions have often had disastrous consequences; I wish right-conservatives would apply their cautious and sceptical views about government intervention in the domestic economy to government intervention in foreign countries too.

mico writes:

The US's defence spending in excess of EU spending is about 3ppt of GDP. At least some of that is spent defending the EU, while the amount the EU spends defending the US is negligible. Some more of that is spent defending US interests in the Pacific, which is less important for the EU for obvious reasons.

Meanwhile the GDP per capita gap between the EU and the US is about 33ppt.

As best I can tell, in terms of dollar value of benefits provided, the US welfare state is as large as that of a typical EU country. It may be somewhat smaller as a proportion of GDP. On the other hand, the US is richer in general.

The extreme outcome gap at the lower end seems to be due to bad lifestyle choices in the US that aren't seen in the EU.

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