How the U.S. Military Protects and Enriches Multinational Speculators

By Polly Cleveland

At a 1972 economics conference, at the height of the Vietnam war, Mason Gaffney presented an invited paper blandly entitled “The Benefits of Military Spending.” The paper so shocked the conference organizer that he refused to include it in the conference volume. Gaffney couldn’t find another publisher willing to touch it. Now, only 46 years later, here’s that paper (draft version), updated by Cliff Cobb, and published in the American Journal of Economics and Sociology (March 2018). What so offended the economics establishment?

In dry economese laced with even drier humor, Gaffney laid out the fundamental land economics underlying U.S. military spending. The logic resembles that of urban sprawl: For a few bucks, John Bigshot buys Old MacDonald’s farm way out in the boonies. Then he visits his pals on the city council of Anytown. They in turn vote to incorporate MacDonald Luxury Estates into greater Anytown, which means the town improves the road, extends water and sewer, police and fire protection, and other benefits to the property. With little personal investment (maybe a suitcase of cash), Mr. Bigshot has acquired a multimillion dollar parcel at the expense of Anytown taxpayers.

In similar fashion, multinational corporations go to third world countries where they acquire concessions for a song—mineral rights, broadcast rights, bank licenses, timber rights, harbor and airport rights, rights of way, or large tracts of agricultural land. Often they have bribed the local ruler, or “cacique” as Gaffney calls him. When angry locals threaten to overthrow the cacique, the multinationals can call in the U.S. government to protect their sacred property rights. The United States may provide guns and aircraft to the cacique, or establish a military base, or finance infrastructure like dams and ports and highways. Alternatively, the United States can support an opponent who promises to uphold those concessions. A small initial overseas investment can yield decades of lucrative return flows to the multinationals.

Documenting dozens of such arrangements, including the original deals for oil in Saudi Arabia and Iran, Gaffney takes a sly poke at the conventional economic treatment of “defense” spending as a benign “public good” equally benefitting all citizens of the homeland. The real-life benefits go to a small wealthy international minority with no particular loyalty to the United States, while ordinary U.S. citizens pay—as consumers, taxpayers, and especially as soldiers.

When I first read an unpublished version of the paper in 1992, 20 years after Gaffney wrote it, I felt a jolt of recognition. I was a Foreign Service brat. My dad served as Economics Officer; what was he doing? Arranging deals for U.S. investors. Everywhere we were posted or traveled there were U.S. military bases. What were they doing? (We FS types looked down on the military, because they didn’t try to learn the local language or culture, and shopped only at the PX.)

I felt the same jolt years later reading John Perkins’ Confessions of an Economic Hit Man. Perkins’ employers sent him out to convince local third world rulers to undertake wildly overambitious, environmentally destructive infrastructure projects to be built by multinational engineering companies like Bechtel and Haliburton. These projects usually failed to deliver the promised economic benefits, leaving the locals in hock to U.S. and European banks and subject to U.S. control. The original excuse for U.S. intervention on behalf of such caciques was that they provided us with a bulwark against “Communism.” Today they provide us with a bulwark against “Terrorism,” but it’s the same pattern.

The United States has dominated this game since World War II, taking over from Great Britain. The Chinese are now bent on doing us one better with military bases in the China Sea, rail and road systems across Eurasia, seaports around the world, and vast soy plantations in Latin America, Southeast Asia, and Africa. It’s the same pattern.

Looking back to 1972, I think Gaffney’s analysis so shocked conventional economists precisely because his method was so conventional. No hint of Marxism. Just good old-fashioned marginal analysis applied deadpan to an array of undisputed historical facts. Even worse, Gaffney poked subtle fun at received economic wisdom. No way could such subversion see the light of print—until now.

University of Vermont Penalizes Rethinking Economics

By Steve Keen, professor and Head of the School of Economics, History and Politics at Kingston University in London
Cross-posted from his Patreon page.

Mainstream economics clearly failed humanity in 2007, when, as the world sat on the brink of the biggest economic crisis since the Great Depression, mainstream economic models were predicting that 2008 was going to be a great year.My favourite such prediction was the OECD’s bi-annual Economic Outlook, which proclaimed in June of 2007 that “the current economic situation is in many ways better than what we have experienced in years“.

EDITORIAL

ACHIEVING FURTHER REBALANCING

In its Economic Outlook last Augutm, the OECD took the view that the US slowdown was not heralding a period of worldwide economic weakness, unlike, for instance, in 2001. Rather, a “smooth” rebalancing was to be expected, with Europe taking over the baton from the United States in driving OECD growth.

Recent developments have broadly confirmed this diagnosis. Indeed, the current economic situation is in many ways better than what we have experienced in years. Against that background, we have stuck to the rebalancing scenario. Our central forecast remains indeed quite benign: a soft landing in the United States, a strong and sustained recovery in Europe, a solid trajectory in Japan and buoyant activity in China and India. In line with recent trends, sustained growth in OECD economies would be underpinned by strong job creation and falling unemployment.

That was two months before the crisis began.

You might think that, after such an extreme failure, economists would be trying to find what went wrong with their modelling. That has happened at policy institutions like the Bank of England and, to its credit, the OECD.

The Bank of England established the “One Bank” research unit after the crash, has employed many researchers from outside economics, and is, in my personal experience, very receptive to non-mainstream ideas now. The OECD established a new unit called New Approaches to Economic Challenges, and is also much more receptive to non-mainstream views than it was before the crisis.

But universities have been a very different proposition.

In university departments, the reaction of the mainstream has been to defend their paradigm, and to penalize those who criticize it. Whereas in the past they would tolerate the odd dissident as just “that guy down the corridor with those weird views” and let him/her teach a range of service subjects, now they are actively targeting such non-conformists for removal.

A recent instance of this was the decision of the University of Vermont to sack a popular lecturer, John Summa, for teaching mainstream economics in a critical manner. The case has all the nasty characteristics of an academic bunfight, of which I’ve experienced several myself. Do read John’s GoFundMe appeal, even if you don’t wish to make a donation.

In the end, he was dismissed, and he is now challenging that dismissal via a court action. I wish John the best, hope that justice will prevail, and I’ve made a small donation ($100) to his cause. I’d be pleased if you did too. He needs $4000, and he’s about 60% of the way there.

I’ve reproduced some of John’s evidence below, but there’s much more on his GoFundMe site.

John Summa’s Statement

Despite solid evidence of exaggerated and false claims used against me to persuade the Dean to deny my reappointment at UVM, these mischaracterizations were ignored by the Vermont Labor Relations Board when they ruled on my grievance. The case is now being appealed to the VT Supreme Court.

But I need help! Click here to learn more:

I allege that proven false and exaggerated claims masked disapproval of my ecological critiques of standard (supply and demand) neoclassical model economics (which I fully and fairly taught according to over 2,500 student evaluations). I maintain that there is no evidence whatsoever to support the Chair’s biggest claim that I was not teaching the standard (neoclassical) model “fully and fairly”.

Make a donation and help me fight academic bullies who don’t want ecological and alternative economics being taught to students. 

I argue that the Chair was leading the removal of a popular and maverick veteran teacher who was exposing students (after teaching models fully and fairly and getting good reviews from students) to the truth about the profound failures of core curriculum models students are required to learn (and do learn). Among other shortcomings I highlighted is the failure of these models to address global warming, growing inequality and systemic market failure.

Purging popular and challenging teachers cannot be tolerated. Help me fight against academic cronyism and intellectual nepotism at UVM. Make a pledge!

Despite some Nobel prize winning economists saying these models are “foolish” and “dead-end” approaches in today’s world  (information I shared with students), I was nevertheless removed based on the belief that I was not teaching “good” economics (Chair’s choice of words) —  a reference to the same models now discredited by some of the profession’s own leading practitioners. Apparently  the Dept. Chair is unaware that there is no consensus on what constitutes “good” economics. Your good economics is my bad economics and vice versa.

The Faculty Standards Committee (FSC) at the University of Vermont was not fooled by the actions of the Chair and voted unanimously to reappoint me and described the review process as “tainted” (and believed the Chair was “out to get” me, according to a whistleblower who came forward to inform me of this fact).

If you would like to help me, please make a donation at my gofundme page. Here is the link

Thanks for helping me stand up to the enemies of freedom of expression and alternative thinking about economics.