The Permanent War

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Keynes' theories were even adopted by militarists -- but with a twist: Whereas Roosevelt's work programs were designed to benefit the general population directly, military Keynesianism turned defense contractors into middlemen, administering government funds privately. It became a bonanza for defense industries, a veritable orgy at the trough. True, it does create jobs -- just the wrong kind of jobs.

War or the threat of war is the ultimate economic stimulus. It's capitalism on steroids. Prolonged use creates unprecedented growth, but the upside isn't worth the risks. The steroids metaphor is especially apt -- side effects include euphoria, confusion, pathological anxiety, paranoia, hallucinations, and even violent criminal behavior -- and users can easily become addicted. Let's face it: We're addicted to money.

Somehow this doesn't seem like what Keynes had in mind. He never suggested that government go $7 trillion in debt, mostly for the benefit of war profiteers. If the economy needs to be goosed every once in a while, shouldn't the government support peacetime industries along the lines of education, health care, day care, and mass transit?

Truman was no match for the militarists in the administration he inherited from Roosevelt. Ultimately, says political science professor Michael Hogan, Truman "failed to assert his authority" over them. By going around the president and directly lobbying Congress, Secretary of the Navy James V. Forrestal (a former Wall Street investment banker) and his iron-triangle cronies successfully sandbagged Truman's attempts to rein them in. The party line was that the war wasn't really over yet and the evil Russians were turning on us -- despite the fact that reliable intelligence estimates indicated no hostile actions from the Russians.

Despite the Cold War rhetoric, the economic-stimulus factor, recognized by General Electric's Wilson and his cohorts, was never far from the surface. It was spelled out in a 1950 National Security Council document, NSC 68, drafted by Paul Nitze, head of policy planning for the State Department. Like Forrestal, Nitze too was a former investment banker. Deep in the document is a line stating that, without the expansion of military spending, the United States would face "a decline in economic activity of serious proportions."

As they say in military parlance: There it is. Without more war another depression would be upon us. Or put another way, we must continue to inflict massive death and destruction somewhere in the world in order to avoid disruptions in retail spending at home -- the whole U.S. economy depends on it. NSC 68 threatened to turn the United States into a "garrison state," Hogan adds, "a society dominated by military institutions, a military economy, and a military mentality."

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