Theories of Military Keynesianism and the Military-Industrial Complex became popular after the Second World War, and perhaps for a good reason. The prospect of military demobilization, particularly in the United States, seemed alarming. The U.S. elite remembered vividly how soaring military spending had pulled the world out of the Great Depression, and it feared that falling military budgets would reverse this process. If that were to happen, the expectation was that business would tumble, unemployment would soar, and the legitimacy of free-market capitalism would again be called into question.Since then the US is addicted to military spending to support the domestic economy and exports. Military spending is so endemic to the economy and so politically entrenched since it is dispersed through so many congressional districts as to be impossible to address rationally. The US economy is now dependent on "military Keynesianism."
Seeking to avert this prospect, in 1950 the U.S. National Security Council drafted a top-secret document, NSC-68. The document, which was declassified only in 1977, all but explicitly called on the government to use higher military spending as a way of preventing such an outcome.…
The authors point out, however, that the "Keynesian" aspect began to unravel in the 1970s when the contract between capital and labor was broken by capital and the initial phase of the welfare-warfare state began to be taken apart in favor of the market-warfare state instead.
Real-World Economics Review Blog
Military Keynesianism and the Military-Industrial Complex
Jonathan Nitzan and Shimshon Bichler