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Peace Economics, Only Way

History

For many many years I believed the Keynesian story that military spending increases would stimulate the economy.  Then I happened upon the work of Ruth Leger Sivard that seemed to conclusively indicate just the opposite.  She used a bar chart of twenty years worth of data comparing military spending as a percent of a nation’s economy and the average annual manufacturing productivity growth rate.  She included the seven largest Western economies in the world and the two largest Scandinavian economies.  Except for Canada, they clearly showed that as a nation’s military spending increased, its productivity growth rate decreased with a correlation of -0.98.  When the European and North American countries were combined by weighted average of their economies, with Japan as the third point and two degrees of freedom, the correlation improved to the near perfect -0.997.  This finding lead to a long journey.  I looked everywhere I could for ways to test, prove, and verify the finding.  My statistics experience at that time was from two courses, Statistics for Engineers, and Business Production.

The Challenge

My scientific world view at the time, 1985, largely consisted of six semesters of college physics, so I was used to having precision mean proof.  But I had a long walk with a friend who insisted repeatedly that in the social sciences, a correlated of 99% usually meant autocorrelation or some other mistake in the calculation.  The discussion got heated several times as this seemed absurd to me.  So I began testing my finding as many ways as I could think of.  Most important, in my mind, was triangulation type techniques.  Since the original finding was based on “latitude” as I saw it, cross comparing several countries and continents over the same time period, I sought to test the results over a long period of time by annual statistics for one country, the United States.  The economic growth rate seemed to have distortions in it, so I turned to the original measure, manufacturing productivity, to fine tune the model.  One of my first tests was to add back the missing military spending to the economic growth rate.  I did this for Germany and World economic statistics as well.  I quickly noticed a bulge in the fifties that dropped off before and after that, so I realized the Kondratiev Wave was an important component.  I used multiyear averaging’s to determined the high and low points of the K Wave.  World War II established the deficit as the other “big three” major factor.  The huge numbers like 33% of the economy in deficit and 37% of the economy in military spending meant they had to offset each other or no model could possibly make sense.  When I began making my sixty year “longitudinal” US model, I noticed a lot of variance between the model and actual data on a year by year basis.  But amazingly these differences averaged out over time and tended to perfect out every eight nine or ten years.  The Encyclopedia Britannica explained to me that what I had found were Juglar cycles.  These Juglar cycles correlated 0.999 for the model period.  I broke nine countries into decades of growth and compared them over time, and sure enough, the general patterns fit the military economic story well.  Next I looked at the logic of the problem that economic power tended to predict four war outcomes in the world wars.  But if military spending significantly reduces the economic power of a country over time, a much lower level of military spending than current levels would be necessary to keep a nation strong over the long run.  So I created modeling for that circumstance.  All of this primary work was done in a one year time period creating my first two works, a long manuscript and then a book.  The manuscript inspired one county commissioner friend of mine to offer to submit it to the Pulitzer Committee.  The book inspired another county commissioner friend of mine to say that my proof was extensive and tedious, but quite convincing.  Soon paperback versions of the book were being sent all over the world by people buying the first copies on Hiroshima Day 1986.

Modern Confirmations

Several confirmations have shown over time that the theory has endurance.  In 1987 an analysis of the Reagan military buildup showed a strong 0.975 correlation of seventeen regions in the United States following the military changes with pro rata economic changes.  Later in the early nineties military build down showed a strong 0.97 correlation for twelve regions in unemployment rate changes.  In the late nineties, the model was extended thirteen years and shown to still be very accurate.  By 2010 I dared to model World War Two, fearing an exception to my findings, and instead found another 0.97 correlation confirming the base theory.

Four Major Proofs

Military Spending Economics

R=-.997 Manufacturing Productivity (G7+2) (1960-1978, Sivard Reuschlein)

R=-.993 Capital Investment (NATO 4+1) (1960-1979, Sivard Reuschlein)

R=.999 Productivity 3+2 factor US Model (1920-1996, Reuschlein)

R=-.97 Economic Growth vs. Net Burden (1941-1948 WWII, Reuschlein)

Evidence Military Hurts and Deficit Helps Economy

  • The four proofs on the prior slide show:
  • That by R the odds are 1 billion to 1 that military spending hurts the economy
  • That by R2 the odds are 100 million to 1 that military spending hurts the economy
  • That by the R=.999 model, and WWII, only deficit spending can offset the negative impact of military spending in short run.

Military Economics

The case in favor of military spending stimulating the economy is all in the deficit stimulating the economy.  When military spending is paid for with taxes, the economy always tanks.  The case for military research stimulating the economy automatically recognizes that the other 90% of military spending is consumption not production to the rest of the economy.  And “too military specific” and “secrecy” reducing civilian benefits of military research to one third its value or less compared to civilian research.

Historians like Arnold Toynbee have repeatedly found military spending as a prime cause in the collapse of empires. Together with the social and political decay that results from the economic decay, you have a complete explanation for empire decay and the modern American situation.

Here is the empire story in 24 power point slides from my Hiroshima presentation:

https://www.academia.edu/15462740/HIROSHIMA_Featured_Speech_Psychology_of_Empire

Hint: to read this paper for free, you must click on the tiny word “read” in the middle of the bottom of the screen after you go to the above link on academia.edu.

Professor Robert Reuschlein, Dr. Peace,

Real Economy Institute, Madison,Wisconsin
CONTACT: bobreuschlein@gmail.com
INFO: http://www.realeconomy.com

MESSAGE: 608-230-6640

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3 thoughts on “Peace Economics, Only Way

  1. Thanks for this informative post. It would be interesting to explore further the commercial spin-offs from military R&D, as these seem to be many: the internet, GPS, touch screen technology for example. All these are of course now seen in smartphones. But surely it would be better and cheaper for the government to spend on R&D for directly civilian use, rather than military use. Having said that, I gather that there are military spin-offs from commercial R&D, so it can run both ways! I found the book ‘The Entrepreneurial State’ by Mariana Mazzucato on state R&D and technological progress to be very interesting. I am all for soft power over hard power where possible if nations want to try to change the world for the better. Do you think the US has now overreached itself imperially?

  2. Pingback: Economics of Peace | jerhail

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