ABSTRACT
This chapter suggests that military expenditures are beneficial in the long term to the civilian economy, since much of the additional spending promotes domestic production in our most capital and technology intensive sectors. It explores the assertion that military spending has contributed to America's declining competitiveness by comparing the national economic performance of 17 major non-communist, industrial countries over the past two decades. The chapter identifies factors that were associated with better economic performance. It examines the hypothesis that among comparable nations, those with heavier military burdens suffered poorer economic performance. The chapter also examines the relationships among the various factors that might inhibit performance to see if any of our results could be explained by disguised correlations. Increased arms expenditures during the Reagan administration could have the opposite effect on the economy that they had during the Second World War.
