Guns or Butter
There is a classic economics model and a graphical curve that represents the trade-off between the economic production of guns or butter. The phrase has come to represent the societal standards of how fiscal expenditures should emphasize defense spending versus social programs. The term originates from around the time of WWI when the U.S. faced an uncomfortable shortage of gunpowder, specifically because it did not control the production of necessary nitrates, which tended to mostly come from Chile (who tried to remain neutral during the war and thereby sell to all sides that wanted to produce gunpowder). Strangely enough, that very example had imbedded in it the very tradeoff this term has come to embody. The alternate use for nitrates is the production of fertilizers to enhance the production of food. Therefore, a limited production of food was the direct result of the excess production of gunpowder for the war. But is was the use of guns or butter by the infamous duo of Joseph Goebbles and Hermann Goring to explain why Nazi Germany needed to have its people understand the importance of war production. They said the German people needed guns and could simply forego butter.
I recently saw a history of military spending country-by-country since WWI. While not altogether surprising, the information simply jumps out at you. During WWI the U.S. outspent everyone else, but just barely spent more than the U.K. and combined, the two spent twice as much as their German opponent. If you throw in Russia (on the side of the good guys), we collectively spent three times what Germany spent. Until the late 30’s, Russia was the top military spender, when Germany came on strong. Shortly thereafter (technically after Pearl Harbor), The U.S. rocketed to the lead, spending seven or eight times what it spent in WWI. At $700B (normalized to 2000 dollars), the U.S. spent more than all the other Allies and the Axis powers combined spent on the war. From the post-war period until the fall of the Soviet Union in the late 80’s, the U.S. spent considerably less but still more than anyone else in the world on its military. The Soviets were clearly pushing up the bidding during those years and even outspent the U.S. for a dozen or so years from the early 70’s until they collapsed on the Glasnost sword and the wall literally came down. What had been a multinational race in WWI (and quite an even one in those years), became an uneven multinational race during WWII, which turned into a two-horse race during the Cold War period, only to become a one-horse race since the late 80’s with the U.S. spending five times the amount of the rest of the world combined on its military.
During all that time there were a few years when China was on the military spending map in third place, but it has only recently moved itself into second place, but still spending only a fraction of what the U.S. spends on guns. I guess it is simply the price of the chosen role of the world’s policeman to spend so much of its GDP on guns. The world currently spends $2 trillion on guns (military budget) with the U.S. spending $800 billion of that. With a global GDP of $94 trillion, the world spends 2.13% of its production for guns whereas the U.S., with a $20 trillion GDP spends 3.94%. We are clearly determined to be the gun-toting sheriff at all costs.
The country as a whole these days seems determined to pull in its horns. The projections are for the military budget to shrink to about 2.7% of GDP in the coming decade. That is a far cry from the 40% during WWII and much lower than it has been throughout my lifetime. During the sixties the portion of GDP that went to guns was still in the 7-8% range while the rest of the world was almost entirely focused on producing butter. For the most part, we in this country have not had to deal too much or too often with consumption shortages like we did during the rationing years of WWII. We had a brief disruption of foreign oil in the early seventies when we had to line up for gas, but we have generally been the land of plenty and even with our outsized military spending, our general economic growth allowed us to have pretty much butter as we wanted. Hence the bulging waistlines of the American population (present company included).
But is that what has really been going on during all those years of profligate military spending? Have we really had enough butter? In the literal sense, we have, but if you think about butter in terms of our overall social wellbeing, it is very hard to claim that the U.S. has kept pace with much of the rest of the Western world. Even those powers we fought against during WWII, Germany, Japan and Italy, have done a far better job. The Gini coefficient is a statistical measure of distribution of wealth and is used to gauge economic inequality by measuring income distribution or wealth distribution. A coefficient of 0 represents perfect equality and a 1 represents perfect inequality. While we all generally believe that wealth inequality is higher in less developed countries, the truth is quite different. The Gini Index for the top five most unequal countries are:
1. Netherlands (0.902)
2. Russia (0.879)
3. Sweden (0.867)
4. U.S. (0.852)
5. Brazil (0.849)
The global average Gini coefficient is 0.64 with all but two countries (Ukraine and Slovenia) being above 0.50. I’m not sure what that says about our world overall since I’m not familiar enough about what the calibrations of the Gini Index imply about human well-being. Nonetheless, my general sense of liberal-mindedness tells me that we need to be in a better place as a world, but certainly a far better place as a model citizen country. I’m a bit embarrassed for Netherlands and Sweden as well and not entirely surprised to see Russia (Putin) and Brazil (Bolsonaro) as high as they are, but mostly I am disgusted to see how the land of the free and the home of the brave has put itself on this chart. Autocrats like Putin and Bolsonaro are expected to be elitists. India sits at 0.832 (#11) and yet China is way down the list at 0.702. What I guess I would want to better understand is the standard of living for people in all these countries and how the Gini Index speaks to that.
These are difficult issues to parse and understand, but one thing I am certain of, the world would be a better place if we could spend a lot less money on guns and focus our collective production efforts more on butter. I know what people will say. They will say that human nature has not and will not change and that the aggressive tendencies of the human spirit require the military spending as a preventative measure. But what is the point of military intervention if the world carries on at peace, but with vast inequality? The guns or butter conundrum may never leave the human condition, but for peace to be meaningful we need to work harder to focus on minimizing inequality.