The War in Ukraine and the Revival of Military Keynesianism

The advent of military Keynesianism is a warning against complacency about the moral superiority of the West in defending Ukrainian democracy.

The war in Ukraine features in our consciousness as resistance to invasion, with the West playing a leading part in supplying military hardware and imposing sanctions on Russia, consequently breaking down international free trade, regulating international payments, and boosting food and energy price inflation. But the war is also changing us with the emergence of a new role for the state in the countries supporting Ukraine’s resistance.

The outlines of this new role are clearly marked out in a recent report in the London Financial Times (‘War exposes “hard reality” of west’s capacity’ 3-4 December 2022, by John Paul Rathbone, Sylvia Pfeifer and Steff Chávez, with Felicia Schwarz). It records that the supply of military hardware to Ukraine is running down Western stocks of weapons, with little prospect of any immediate replacement. The United States in particular has dispatched around a third of its stock of Javelin anti-tank missiles to Ukraine, and a similar proportion of its Stinger anti-aircraft missiles.

The situation in Europe is worse. The United Kingdom has been delivering next-generation light anti-tank weapons (NLAWs) to Ukraine at the expense of supplies committed to other buyers. France has supplied six Caesar self-propelled howitzers to Ukraine, that were due to be delivered to Denmark.

The supply constraint on Western arms production arises because the end of the Cold War, at the start of the 1990s, gave rise to a ‘peace dividend’ of reduced armaments expenditure that slimmed down weapons production to ‘just-in-time’ lean production, with reduced inventories of armaments, and especially of the heavy weaponry that has been of limited use in the anti-terror wars that the West has been involved in since the end of the Cold War.

Following the Russian invasion of Ukraine, Western governments are committed to increased defense expenditure. But their armaments industries, under conditions of peace-time economic efficiency, do not have the spare capacity to ramp up production. Many are already operating shifts around the clock to satisfy orders comings in. To increase production they need to invest in new capacity. However, this is only worthwhile if armaments companies can be assured of contracts into the future expected lifetime of any new productive equipment. Industrialists with interests in arms supplies are now complaining about the time it takes to get contracts signed. An additional worry for them is the prospect of peace breaking out, which may leave armaments manufacturers with costly, but unused productive capacity that may have to be scrapped with the next technological innovation. (Much the same dilemma is faced by oil and natural gas producers who are being urged to expand production to replace sanctioned Russian supplies).

In short, weapons producers want governments to underwrite the profitability of their investments. This is precisely the alliance between industry and the state that formed the basis of the military Keynesianism that Michal Kalecki criticized during the 1950s. He showed how, at the height of the Cold War, Western governments subsidized private capital with arms contracts paid for by taxpayers. This arrangement lay at the heart of what has come to be described, somewhat misleadingly, as a ‘golden age’ by heterodox economists, who lament its replacement by "neoliberalism." The real danger is not neo-liberalism but the takeover of the state by industrial interests which cannot be denied because of the external and internal threats to democracy.

The advent of military Keynesianism is a warning against complacency about the moral superiority of the West in defending Ukrainian democracy. The resurgence of what President Eisenhower once called the military-industrial complex brings our industrial magnates closer to centers of power. In this respect, our oligarchs are no better than Russian oligarchs, even if we defend existing democracy because it offers more scope for progressive politics than autocratic nationalism.

Military Keynesianism challenges democrats about the limits of the democracy that is being fought over in Ukraine. Is the future of that democracy assured by a state which underwrites industrial profits? Or does that future also require the extension of civil rights and welfare to all classes? If the struggle for democracy is just to save Ukraine for democracy, or to extend democracy in the Russian or Chinese spheres of influence, then that struggle will take the West down the path to the oligarchic capitalism of Russia.

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