Paul Jay: One of the big issues about the stimulus and government expenditure is the debate over military expenditure. People say that World War 2 helped to get America out of the 1930s depression. So, forget the kind of moral issues, ethical issues, or issues of international law — this expansion into Afghanistan may have some kind of stimulus effect on the American economy, and maybe that ain’t so bad, and the whole military-industrial complex, maybe that ain’t so bad because it is a way of stimulus. What’s your take on this?
Robert Pollin: Well, it is an important debate, because, of course, given the current severe recession, people look back to the 30s and what got us out of the depression. And it’s very clear that, for the whole decade of the 1930s, we had a lot of social programs aimed to stimulate the economy, the Works Projects Administration, the Civilian Conservation Corps, etc., and they conducted those through the 30s, and they didn’t really get us out of the depression. And then World War 2 hits, and we go from 13% to 2% unemployment within a year. So, the story is war is the answer to depressions.
PJ: And part of the right-wing critique, the other piece of that story, is that the government stimulus to create jobs is not. . . .
RP: . . . and government stimulus on anything other than war is not. That’s not the crux of the matter. The real crux of the matter is that it was government deficit spending, borrowing money and spending and injecting that into the economy, that got us out of the 1930s depression, and war was the only thing that had the political support to raise the level of deficit spending necessary to overcome the depression.
PJ: So, you are saying it’s a quantitative issue. It’s the amount of deficit spending on war, as compared to relatively little on job stimulus. That’s the real story here.
RP: That’s the real story, and in fact, if you actually add up military spending versus domestic spending, comparing dollar for dollar, a million dollars on the military versus a million dollars on education or clean energy, military spending is actually a bad job stimulus. Education, clean energy, health care — those are much more effective as a job stimulus. The only issue is politically whether we can move enough money into those areas to become effective sources of new job creation.
PJ: So, how do you know that?
RP: OK, this is research that I have done based on US statistics from the Department of Commerce, using the input-output model from the Department of Commerce. What we basically find is as follows: if you spend a million dollars on the military, you create 12 jobs; if you spend a million dollars on clean energy, you create 17 jobs; if you spend a million dollars on health care, you create 20 jobs; if you spend a million dollars on education, you create 29 jobs.
PJ: Why? To get into the actual nitty-gritty, why is that the case?
RP: Basically, there are two factors going on here. Number One is how much money is spent domestically versus how much is spent abroad. Obviously, military spending has a high proportion of spending abroad, and that’s not gonna create jobs in the US. These other areas that I mention — education, health care, clean energy — are much more focused on the domestic economy. . . . And the second factor is what we economists call labor intensity, which is the relative amount, when you spend a million dollars, that goes to hiring people versus spending on machines, on land, on transportation, on energy. Investing in education, investing in heath care, and investing in building a new clean energy economy entail much more use of people and rely less on these other costs. . . . If you spend a million dollars, a billion dollars, a hundred billion dollars, on anything, if anybody spends it, you will create jobs. The question, the real relevant metric, is how many jobs relatively, one activity versus another. Militarism is a bad source of job creation. These other areas are much stronger as sources of job creation.
Robert Pollin is Professor of Economics and founding Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. This video was released by The Real News on 24 December 2009. The text above is an edited partial transcript of the interview. See, also, Robert Pollin and Heidi Garrett-Peltier, “The U.S. Employment Effects of Military and Domestic Spending Priorities,” PERI Working Paper 151, October 2007.