Real World Economics: 75 years of wisdom on national defense should not be discarded
The most important “public goods” for any nation are defense against foreign enemies plus domestic public safety. Indeed, the need for these goes back to human life in caves. These needs are why governments were instituted. They are why the nation having power to tax individuals in money or in kind is universal.
Edward Lotterman
However, both the levels and types of defense needed and how much individuals must pony up are often contentious. Disagreements must be hammered out through politics. That is happening in our nation right now as a Donald Trump-led Republican party is pulling a defense U-turn, repudiating policies and institutions constructed by Republicans such as Dwight Eisenhower, Richard Nixon, Gerald Ford, Ronald Reagan and both Bushes, father and son.
“Public good” is set in quotation marks to make clear this is the term used in economics for goods or services that benefit a society as a whole. Public goods are non-rival and non-divisible. Non-rival means that my being protected by a tornado siren or a radar watching for aircraft or missiles does not reduce protection for anyone else. Non-divisible means it is impossible to separate the benefits of an aircraft carrier or fire engine and allot portions to each individual.
Moreover, public goods are ones which have “spillover benefits.” Since the benefits of patrolling police cars or an airborne brigade of soldiers cannot be denied to anyone in a society, no private individual or group will voluntarily supply them in an optimal quantity because no one wants to bear all the costs of such efforts while myriad others free-ride on the benefits.
Defense decisions inherently are economic decisions in that they involve choices in use of resources to meet needs. But monetary values for the security achieved are not clear as they are for a bushel of soybeans, boys T-shirt or half-ton pickup. There is no “market price.” Yet security and safety do have value, enormous value. And economic insights still apply in analysis.
One is “marginal cost.” How much will total cost go up or down with a change in some unit, whether an airplane, howitzer or intangible alliance? Another is “economies of scale,” the degree to which unit costs vary with size of the producing operation.
The immediate question is that as the old GOP dies and is replaced by a Trumpist party, an 80-year policy of collective defense faces abandonment. Early on, Trump expressed more confidence in Vladimir Putin than in his own military and civilian national security staff. He favors Russia over Ukraine.
Most importantly, he views collective security pacts such as NATO in Europe and ones with South Korea, Japan, Australia and other Asian nations as one-sided, altruistic gifts from us to them with no benefit to ourselves. He not only threatens to withdraw from these alliances largely created by past Republican presidents, but calls on our potential enemies to attack current friends. As Russia amps up the most destructive aggression in Europe against a nation whose territorial integrity we pledged to guarantee, that is the key issue. Should we continue to oppose aggression in Europe or abandon it?
Critical thinking is not Trump’s forte and his knowledge of history minimal. He doesn’t understand what happened in 1914 or 1939 as the world collapsed into wars of epic destruction nor in the crucial period from 1946 through 1952 as our nation worked with others to create structures that gave us seven decades of peace and prosperity. He does not realize that we are in NATO and in other military alliances for our own benefit and not out of generosity to others.
Trump fixates on whether or not some other NATO members meet a non-mandatory spending target mutually agreed on some decades ago. Yet there are no NATO dues. It is no central budget. There is no contractual spending level in any treaty. That some member-states underspend a target is unfortunate, but should we abandon 75 years of collective action and go it alone?
“Dear Abby” understood the key question better than many in the contemporary GOP. When someone wrote asking whether they should divorce a disappointing spouse, Abby asked, “Are you better off with him than without him?”
We may hate it that Germany and France spend less than 2% of GDP on their militaries, but would we be better on our own? Would we simply reduce the total size of our Armed Forces by whatever we have in the U.K., Italy, Germany, Turkey and other NATO member countries and pocket the cash? Or would we move these assets to the continental U.S.? Would we remain as safe after either action?
Will we be safer if we let Putin’s Russia pick off Ukraine, then Moldova, Estonia, Latvia and Lithuania, all formerly under Russian control? Then Georgia, Azerbaijan and Armenia? And, if we let Putin reconstitute the U.S.S.R., what signal would we send to China and the countries that it confronts? Without the U.S. as a trustworthy partner, Taiwan, the Philippines, Indonesia, Malaysia and even South Korea and Japan would have to accommodate Chinese hegemony in Asia. And then so would India. How would that affect our security and our economy?
We got 80 years without war in Europe because the U.S. had been willing to arm those fighting Germany via Lend-Lease, because of the Marshall Plan of post-war aid, because of the Berlin airlift and NATO. The generation of leaders who forged these actions and institutions had seen what happened without cooperation.
The U.S. had no reason to go to war in 1914. Yet we did three years later, largely because of German submarine warfare but also because we realized that a world in which a hegemonic non-democratic Germany dominated Europe would harm our nation’s economy as well as its security.
Revulsion at the carnage of that war gave rise to isolationism that kept us out of the next European war for two years. But even before the Japanese pushed us into war at Pearl Harbor, key U.S. leaders realized that a world in which brutal dictatorships dominated Europe and its colonies in addition to Asia would be one that was dangerous to our safety but also to our trade, investment and general economy.
Isolationism had been strong in both political parties after World War I. It remained a considerable force in the GOP after WWII. Key Republican leaders, including Ohio Sen. Robert Taft, wanted to write off Europe. They saw it trending into detested socialism and continued U.S. military spending against a threatening U.S.S.R. would mean taxes could not be cut to pre-war levels.
Fortunately, other Republicans, led by Michigan’s Sen. Arthur Vandenberg, thought differently. We gave Marshall Plan economic aid, helped create NATO and supported the genesis of what became the European Union. We should be immeasurably glad that we did.
NATO membership benefits us because there are economies of scale and scope in defense. We get more from our defense budget from operations integrated with allies over decades than we would with the same money spent alone. The marginal costs of being in alliances are low or negative. We would not reduce spending to any degree if we pulled all of our military out of Europe and from South Korea, Japan and Southeast Asia.
There was great wisdom in U.S. foreign policy when Republicans like Richard Lugar, Bob Dole, David Boren, Rudy Boschwitz and Dave Durenberger were in the Senate and Minnesotans such as Al Quie, Jim Ramstad or, in earlier days, Clark MacGregor and Ancher Nelson were in the House. There still are Republicans with sound thinking on defense. South Dakota’s Sen. John Thune is one. But we stand at a very perilous watershed. Voters need to understand that.
St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.
