Thursday, 25 April 2013

Investment Not Destruction

Polska wersja tutaj....

These are times of austerity right? Economic growth is slow, government income reduced and public finances strained. Tusk’s government is seeking to reduce its social spending, freeze the salaries of public sector workers, increase the retirement age and maintain the increased rate of VAT. Times are tough and the belt needs tightening. 

However, in one area the government is rapidly increasing its spending, not just in real terms but in relation to most other European countries: the military. In 2013 the Polish government will increase its defence spending by nearly 7% - raising it to an annual total of 31bn złoty  – and plans to invest a further 100bn złoty on defence by 2020.

 In 2012, Poland was already spending more than 1.9% of its GDP on defence, one of the highest proportions in the whole of the EU. On average EU countries spend 1.61% of their GDP on the military. Only the UK and France spend more than 2% of their GDP on defence (as they seek to protect their failing imperial ambitions), with the next highest being  Greece and Cyprus that are hardly models for emulation when it comes to budget policy. Whilst the Polish government spends more on its military compared to most other European governments,  it also invests less on social security (18.5% compared to an EU average of 26.4%) and health (7% compared to 9%). 

The question to be answered is whether this disproportionate amount spent on defence is justifiable and brings Poland any discernible benefits. This can first be answered by assessing the usefulness of the country’s enlarged military and the degree to which it keeps the country safe from any outside threat.  

This can be looked at by comparing military spending in Poland with that of other countries in its geographical and political location (i.e. those Central Eastern European countries that are members of NATO and the EU).  Poland spends far more on defence than any other country in CEE. This is not only true relatively but also in absolute terms – with the second largest defence spender in CEE, the Czech Republic, having a defence budget that is more than three times less than that in Poland. Furthermore, the trend in CEE is for governments, such as those in the Czech Republic and Romania, to cut their defence spending.

In recent years Poland’s military spending has not just been geared towards national defence. Poland has been engaged in a number of costly offensive actions, most notably in Afghanistan and Iraq, sending the third largest number of troops to Iraq out of any of the countries engaged in this conflict.  Poland also committed itself to the building of the US National Defence Shield on its territory. President Komorowski has recently criticised Obama for cancelling this and declared that Poland should push ahead with its own project of building an independent shield. The justification for this is that it will be needed to protect the patriot missiles that the USA still propose to situate in Poland, although perhaps a safer and cheaper option would be not to allow these missiles into Poland in the first place? 

Michał Kalecki was one of the first to recognise how state spending on the military was partly used to help enhance economic growth; and how private capital preferred military spending over other forms of investment as it helped to boost private profits without competing with businesses in other more conventional economic markets. It may not be a palatable conclusion, but it is nevertheless true, that government spending on weapons can help to boost industry and employment. For example Huta Stalowa Wola has recently signed a deal with the military worth more than 500m złoty.

Whilst military spending can boost employment and economic growth, the AmericanKeynesian economist Paul Krugman has recently asked,  ‘why would anyone prefer spending on destruction to spending on construction, prefer building weapons to building bridges?’ To put it another way, would it not be better for the Polish government to build new hospitals and schools or use its steel industries to help produce wind turbines, rather than make weapons that kill children as they explode in Afghan villages? 

The more that resources are directed towards destruction, the less that we have for economic and social construction. As Martin Luther King once stated: ‘A nation that continues year after year to spend more money on military defence than on programs of social uplift is approaching spiritual doom’.

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