 Good afternoon ladies and gentlemen. Welcome to session number eight. This session I'm going to be discussing the post World War II operation of the national security state. This has been a major avenue for the growth of government in American history, sometimes faster, sometimes slower. Right now here in 2003 we've entered into one of the spurts and it looks as if it's going to continue at least for another year or two, perhaps more we shall see. During World War II the United States built up a tremendous military industrial complex. It wasn't known as that at the time but after that turn of phrase came into general use in 1961 when President Eisenhower used it in his final speech many people were able to look back and see that that's exactly what it was and indeed it was by many measures the biggest military industrial complex that ever existed in American history. We saw earlier today that that some 40% of measured gross domestic product was being devoted to military purposes for some three years running during World War II and the post-war military economy never consumed that many resources either relative to overall output in the economy or even in absolute terms. World War II was such a big deal that even in retrospect it's still bigger than anything since then without even comparing it to the economy or anything else. It's just a gigantic undertaking involving scores of millions of people in one capacity or another. Now when the war ended the United States found itself in a position it had never before occupied in the world. The US economy had been the biggest in the world for a long time it became the biggest in the 19th century in terms of the value of its output but even though the United States was a great industrial power if you want to call it that the United States did not channel that economic potential into military purposes except during World War I and then only very briefly after World War I the military forces that had been built up for the war were largely dismantled the army which had four million people in 1918 was reduced back to a couple hundred thousand and during the interwar period the military typically received less than 1% of gross domestic product for its support so it was it was not non-existent but it was a very trifling military organization even in absolute terms and certainly compared to the military forces of the major European countries or Japan. So during World War II when the United States became such a gigantic military power in every way our Navy was built up enormously it roamed the earth's oceans it had outpaced the British Navy by far during that time the United States Air Force had been developed with the long-range bombing capacities and bases scattered around the world the technology had been developed up to and including atom bombs which only the United States possessed at that time so in 1945 the United States was in many respects the world's military superpower and that was a completely new situation for this country and not one that everybody welcomed but in a sense one that many people viewed as a kind of fate or destiny that had to be dealt with rather than walked away from and the reason of course they they felt the United States should not simply dismantle its armed forces as it always had in the past after engagement in major war was because of the situation in Europe and Asia as I said earlier in many respects the Soviet Union was the true victor of World War II and at the end of the war it found itself in the possession of a big part of Europe stretching way out into what was then Czechoslovakia in penetrating deeply into Western Europe and occupying part of Germany and Poland and all of those Eastern European countries that became its satellites and even though the United States and the Soviet Union had been allied in fighting Germany I think it would be wrong to say that that Americans in general ever fully embraced the Russians in the same way that they embraced say they are British allies and there was always lingering distrust many people were afraid of communism and no matter how smiley a face the State Department and the President might paint on Stalin it just didn't work for a lot of people and they continued to view him as the worst kind of dictator even though many of them still at that time did not understand what a horrible monster he was but soon after World War II many more people became aware of that and that that only heightened the tension between America and the Soviet Union so the the end of World War II merged almost seamlessly into this conflict with the Soviets and within a few years State Department officials such as George Kennan were propounding the document containment as a way of dealing with the Russians and what was taken to be their aggressiveness in the world people feared that they had such a powerful military apparatus that they might simply overrun other parts of the world as they had overrun Central and Eastern Europe and there was no doubt that they did have an enormously powerful military machine in 1945 we can say everything we want about the bungling Russians but the truth is although they got some aid from the United States in Len Lise assistance for the most part it was their own resources and ingenuity and blood that went into defeating the Wehrmacht at World War II although most Americans don't appreciate it was fought almost entirely on the on the Russian front not on the Western front I mean there was hardly any fighting there at all until the last year of the war and the fighting in the Mediterranean was a trifling affair by comparison with what was going on in Russia so the Russians paid the price and they ultimately triumphed they defeated the Germans and so I am not one of those who's inclined to just dismiss them and say it was a bogeyman the idea that the world had anything to fear from the Soviets was just a creation of people who for their own purposes sought to to have a cold war now of course the fact that the Russians had a powerful military machine and an evil government those facts in themselves do not necessarily imply that they had aggressive designs or really hope to overrun France or go any further than they had already gone those issues are more arguable ones but I just want to make clear that I'm not among those who who blame the cold war entirely on on Americans I think there was another side involved and there were some some extremely evil people on that side the more one reads about the history of the Soviet Union the more disgusted one becomes it was it was exactly what Reagan called it an evil empire in in every sense of the word but whatever might might have been the reality the the view of the decision makers in the U.S. government in the Truman administration quickly became one that favored stout resistance to a Soviet expansion and Truman himself took readily to that view now the general public did not take quite so readily to it particularly to the the the idea that huge amounts of money should be spent on the American military apparatus in order to provide the the reality of resistance and the the punch for an effective containment policy after all Americans had just finished paying enormous amounts to fight world war two and they weren't exactly in the mood to keep keep coughing up those kinds of resources indefinitely as of 1946 and 1947 furthermore these threats were far away they were not so easily represented as as immediate threats as as Hitler had had been or or the Japanese after they let loose their bombs on Hawaii so it was a harder sell for the government to persuade the general public that we needed to launch back into a big military program even though leaders of the Truman administration decided fairly early that that's what they would like to do nonetheless there was continuing resistance particularly by the public's representatives in congress when the administration proposed to increase the military budget there was tremendous opposition in congress and on one occasion when the president was discussing this situation with senator vandenberg who who by that time had transformed himself he was no longer an isolationist as a result of the experience of world war two and the post-war situation and had become something of an early Cold Warrior in his own right vandenberg advised to Truman that what what was necessary was in his words to scare hell out of the American public and I think that was good political advice indeed that that sort of scare works wonders at least for a while in the American political process so even in the late 40s the government of the United States was working to represent the Soviet threat as as really more menacing than in retrospect it appears to have been they were releasing information about the number of Soviet divisions for example that that that counted divisions of the red army that were that were not fully equipped or manned or were not we're not in active status and so forth so it made it seem that the that the legions of potential red army personnel were endless and the only way to keep them from overrunning Western Europe was by an enormous defensive effort there's a an essay I want to recommend to you that deals with this time and place by Ralph Raco it appears in the the book reassessing the presidency which is edited by John Denson published by the Mises Institute and if you haven't read Raco's essay on the Truman administration I highly recommend it it's it's excellent it's a it's like everything Ralph writes it's it's beautifully written it's well documented and it pulls together in a single essay more pertinent information and argument with regard to the Truman administration than I've ever seen in one small space before so one can learn a lot from that single essay by Raco and I hope you will read it if you haven't done so already as part of the reorganization of the American defense apparatus after world war two in order to in one sense put into effect what had been learned during the war and in another sense to get ready for future and different conditions the military was reorganized congress passed a huge piece of legislation in 1947 the national security act which which created the department of defense before we hadn't had any single government agency we had a separate war department and a and a navy department and now not only the army and navy but but another military department which was was created at the same time the air force was brought underneath the department of defense and the secretary of defense became from that time forward if not the most important member of the cabinet certainly one of the two or three most important in every administration besides the department of defense for the civilian part of the war machine the the act created the national security council composed of high-ranking government officials and in possession of its own permanent staff so that these people could concentrate on and inform themselves with regard to issues bearing on national security and then they would be the principal advisors to the president with regard to national security matters so this became a very important part of the executive office of the president and remains so today the central intelligence agency was created at that time to replace the old os s the office of strategic services that had provided intelligence organization during world war two and the director of central intelligence was made the person responsible for bringing together all the intelligence that might be acquired not only by the cia itself but by any other government intelligence department including those of the military services so we had from 1947 on this arrangement of of national security affairs in the government that has operated ever since then so this whole setup is is now 56 years old and we we've had a good chance to see what it can do and that's what i'm going to talk about the events of the late 1940s helped to solidify what we can now see is the onset of the cold war historians find it pleasant to argue endlessly about exactly when the cold war began it can't be dated in the same way as the japanese bombing of pearl harbor that's pretty definite timing but as i said there was always some tension between the united states and the soviet union even before the end of world war two but that tension really became much greater after the war ended soviet troops were occupying northern iran at the end of the war and the u.s. government decided well they shouldn't be there that was a kind of expansionism that shouldn't be tolerated because where were they going to go next if they had moved into iran then perhaps the next thing you know they'd be at the indian ocean so that was protested they seemed to be acting as if they were trying somehow gain control of the dardanelles which is an important chokehold on commerce in the eastern Mediterranean so the u.s. government protested those soviet moves communist insurgents were operating actively in Greece at that time and the u.s. government decided that that wouldn't do either to have the greek government go communist after all we already had this this huge area of central and eastern europe under soviet control so a line should be drawn at the border of greece and so they did draw that line and and they in connection with greece in particular propounded what came to be known as the truman doctrine and that was the doctrine that when existing governments were menaced with communist takeover the united states would in one way or another go to their assistance now one has to do very little thinking to realize that this kind of commitment was simultaneously a commitment to prop up a lot of really vile governments around the world because many of the governments that were under attack to some extent by communists or people who could be labeled as communist even though they might be just unhappy peasants out in the local jungle a lot of those governments were no other regard governments americans would care to support in fact they were they were eminently loathable in many cases and yet a commitment to aid anyone resisting communism put the united states in this position of drawing lines according to that one criterion and over the years the operation of foreign policy in accordance with that doctrine had countless unfortunate consequences it it for example led the united states to to to overthrow the government of iran in the early fifties and and to bring in and support the the shah and and to support a really tyrannical government in iran and to make a lot of iranians profoundly unhappy not just against the shah's government but against the united states for supporting it and we're still living today with the unfortunate consequences of that particular implementation of the truman doctrine but it had similarly unfortunate consequences all around the world including the us a support for anti-communists or alleged anti-communist forces in vietnam which eventually led to us involvement in full-scale warfare there and got several million people killed in the process so this was a doctrine that was we might think in retrospect too readily arrived at it might have been one thing to say all right let's go help the Greeks and keep Greece from being taken over by communists but by by making this a kind of general rule for the conduct of us foreign policy the the country was put in a a straight jacket that didn't always serve its best interests in 1948 these tensions with the soviets reached the point where the soviets decided that they would exercise their their chokehold over access to berlin which had the curious position of being contained entirely within the soviet sector of occupation in germany so it was a little island in their sector but itself divided into sectors among the occupation powers so it made no sense strategically to have ever made it that way to begin with and it was tailor made for the russians to use to blackmail the americans and so they they did that by closing off land access to the city in 1948 and the united states of course rather than just letting the the city go and saying all right it's not worth fighting over and it's not worth worrying about in some other respect it's in your sector it's yours decided to keep the non-soviet sectors of the city alive with an airlift and with the aircraft of that day this was a monumental undertaking because they didn't really carry all that much cargo and so we had all of these these small cargo aircraft flying 24 hours a day flying from west germany to deliver supplies to keep alive the people of west berlin until finally the soviets decided that they didn't want to go to war over this either and it really wasn't working their their chokehold wasn't causing the americans to give up control of berlin in their their sectors so so they relented but that whole berlin closure and airlift episode was like verging on war between the soviet union and united states because embargoes which this seemed to be a species of are themselves acts of war in the very next year 1949 the chinese forces in china finally after decades of fighting drove their opponents off of the mainland on to refusion formosa and that became known here as the the fall of china or if you were one of the fall guys the loss of china for which certain american diplomats were blamed supposedly if the united states had acted differently or perhaps had given more military support to the nationals forces then the chinese would not have won i think that quite unlikely myself but but this of course became a a kind of litmus test for conservatives as opposed to truman liberals for a long time in this country recriminations over and finger pointing and blaming people for the fall of china i actually blame gordon tellak myself but but it's not as much fun to do that when gordon's not in the audience it's gordon likes to talk about when he was in the the foreign service in china before the communist victory there so he makes a good patsy in my mind also in 1949 the the whole tenor of the conflict with the soviet union change when the soviets tested an atomic bomb for for for four years after the end of the war the united states had felt itself to be holding a trump card the soviets had all of these divisions of the red army and these tens of thousands of tanks and so forth but we had atomic bombs and the kinds of aircraft that could deliver them over very long distances so we always felt that if worst came to worst we had what it would take to defeat them and and and now in 1949 we realized that oops we never thought they could nearly so quickly find their way to the development of a working atom bomb but but they had in part because while they were carrying off factories from from east germany they were also carrying off german scientists who were instrumental in hastening their production of nuclear weapons so that that changed things and and made tensions even greater than they had been and then the north koreans began their invasion in the middle of 1950 of south korea and almost drove american forces who who went to the assistance of the south koreans into the ocean before a successful counter attack was made and and then of course that was too successful because macArthur drove all the way almost to the chinese border thereby provoking the chinese to come across the border and counter attack the counter attack so the the outcome in korea was a stalemate after a considerable loss of life on all sides and that stalemate has persisted to the very present and once again we have a situation here that is that is extremely germane to foreign policy today we've now got this situation with these north koreans claiming to have atomic weapons and whether they do or not they certainly have a gigantic conventional capacity right on the border close enough that they can use artillery to blow soul to smithereens and we know they can do that whether they have any atomic bombs or not so so this is a very serious gang of thugs armed and positioned in in a way that makes them capable of of considerable blackmail and of course that that's clearly what they're trying to do simply extract various concessions and resources in exchange for relenting in these threats to to wreak havoc against south korea in particular and perhaps against japan as well so the events of the past 55 years as were in many cases just retain life they never just happen and pass away situations continue to burn even if the embers don't seem to be very red they may burst into flame again from time to time well we can look back and say definitely the korean war uh got the cold war started for sure even if we don't think it had already begun and many people would think that that war was certainly an unfortunate thing but not dean atchison atchison wrote in his memoirs uh korea saved us well what did he mean by that well uh remember the trimming administration had been committed for years to a military buildup for the purpose of global containment of the soviet union and its proxies but it had been unable to get congress to approve the money well with the outbreak of the korean war and the intervention of large numbers of american military forces on the korean peninsula the government could then go to congress and get agreement for tremendous buildup of the military and it's very easy to look back at the graphs and see this big jump up in military spending and associate that with the korean war but in a way it's a spurious association it's politically associated with the korean war but the great bulk of that buildup was not ever intended or ever directed toward anything connected with korean war it was for the purpose of building and equipping forces in other parts of the world in europe and in other parts of asia especially so what atchison meant was uh we were we're getting nowhere in getting congress to give us the money for a big military buildup to wage the cold war but korea saved us and very often we'll see over the past 50 years some such crisis some such flashpoint saves the government's whole military undertaking and this one worked like a charm so we can view korea as the fulcrum that turns us fully on to a cold war status now the cold war was what we used to think of as a permanent war i mean all my life i was born during world war two so for all my life when i had any awareness of what was going on in the world the cold war seemed like just the state of nature it's all it's always been there it'll always be there it was hard to imagine there being no soviet union or no no communists out there trying to as our leaders always said take over the world now of course we look back we see this whole terrible central planning military machine called the ussr just went to wreck and ruin it's no longer much of a threat to anybody directly although it's still indirectly a threat because it still has all those nuclear weapons and people can't have accidents or let them fall into the wrong hands so they're they're not without some danger but the world no longer lives under the cloud of gigantic exchange of nuclear missiles that it lived under for decades during the cold war so that's gone it wasn't a permanent war after all but now just in the past couple years the the authorities having realized what a good deal in many ways the cold war was have found a new basis and an even better basis for permanent war namely the war on terrorism because whereas the soviet union could implode the threat of terrorism can never go away the president can always come forth and announce that he knows something that we don't know about a terrorist threat out there nowadays any of us could if we cared to actually take ourselves to russia and hike around almost anywhere we wanted to go and say well you know it doesn't look too bad to me but we can't hike around the world and say well i don't see any terrorists it's in the nature of terrorists that one doesn't see them right they look like normal people and that's good because anybody could be a terrorist which means the government has to take measures not only against the whole world any part of which might be harboring terrorists but it has to take measures of surveillance and protection against all of us because we might be terrorists or in some way perhaps even inadvertently be aiding or abetting terrorists so what could be better for the conduct of a permanent war i worked out a while back a little scheme kind of mental model if you like of what you need if you want to have a permanent war now at the outset you might think that's a ridiculous concept why would anybody want to have a permanent war so really what i'm thinking of is not a permanent shooting war i i don't think very many people want every year to be like 1944 that's not in too many people's interest but if you can have permanent preparation for war especially if that war never actually comes about that can be a very good situation for many people who play some role in carrying on this permanent war so what you need if you want to carry on such a campaign is first of all an ideology to justify doing it during the cold war anti-communism served that purpose uh if we didn't already fear and hate communism the government was continually exhorting us to do so and uh and most americans were reared and instinctively came to revile communism that was not a bad thing except that it was embraced so mindlessly it would have been all right if we had all done our homework and discovered who the communists are and what they do and had loathed them accordingly but that wasn't how we arrived at it we arrived at by being told have these beliefs and then embracing them and that's not a good sign when people act like sheep secondly you you need to have powerful political factions who benefit in terms of the realization of their very specific objectives in life so if for example you want to get business interests involved in an enterprise there needs to be money in it business needs to make money when it does things that's what business is for if you want to get politicians involved then you need to give politicians what they want uh which tends to be for those who hold elective office things that work toward helping them get reelected uh if you want to get the military organization involved you need to provide somehow the things military officers want pay perquisites a big budget for the military organization lots of opportunities for advancement and recognition of their military prowess so you promote their careers and what we're talking about specifically here is what came to be called the military industrial complex and i called the military industrial congressional complex because in the united states by the late fifties and into the nineteen sixties congress had awakened to the potential that the military industrial complex held if congress more actively micromanaged it by doing so members of congress particularly in the the appropriation subcommittees that oversaw the military budget and and the military authorization committees these people who held strategic positions with regard to congress's military affairs uh could in fact design things in a way that targeted benefits to people who would be grateful and then would in return uh see to helping them in various ways with getting votes and money for campaigns and and in the good old days in the fifties and sixties just a lot of outright income and kind entertaining them at hunting lodges providing prostitutes cash in a plain brown wrapper uh you name it uh why do you think i call them the good old days so uh congress began to take a much keener interest so keen an interest that i think they need to be recognized as an important actor in the mic and so i add congress to this whole setup here i've i've got a little diagram here to to uh add a few details notice at the top i've got the public uh because it's easy to start talking as if the whole world's being run by a conspiracy and and first of all it's not a conspiracy a great deal of what's being done here is being done in a perfectly open way uh there's a little bit of secrecy like the cash in a plain brown wrapper but uh but most of it is not a conspiracy it's just a a coalescence of interest of people who have important roles to play in managing the military affairs of the country now the public is engaged up here because that they pay the bills for all this and so they've got to be kept under the influence of the appropriate ideology and they've got to be given the appropriate information to make them tolerate whatever it is that the machine is made to do but furthermore the public gets involved here because many members of the public will actually themselves benefit they'll get earnings they'll get jobs they'll get uh profits for their businesses so it's not just a handful of key players uh who are are getting something out of the operation of the mick uh it was actually millions and millions of people for decades on in so it's not a small political faction you know it's not like there being 2000 sugar farmers who get sugar subsidies it's more like uh anywhere from four to to eight ten million people at any given time in the cold war who are quite directly tied and many others indirectly tied for example all the people who run retail businesses in areas with a lot of military activity have a keen interest in keeping those military contracts or those military bases operating at a high rate because it's the people who work there who provide the customers for their businesses so we've got the public up here but it's a it's a removed part of the whole scene and in the complex itself we've got the department of defense and the regular military departments and the national guard we sometimes forget about the guard but uh but that's a large number of of people and and quite a bit of procurement and and equipment and what have you and it's especially important where congress is involved because the national guard units are the descendants of the militia and they're local people they they're your friends and neighbors and uh and uh you you can make very uh tightly focused promises to them if you're a congressman you can say I'm I'm going to insert in the next military budget funds for another c-130 for the local air force base and in fact so dependent did the guard become on these special congressional favors that the members of congress and the military departments entered into thinly veiled conspiracies to make possible these kinds of add-ons so every year the the official pentagon request doesn't include many items of equipment for the national guard but they've already sat down in the back room to decide which member of congress will add on how many c-130s for which base is where but of course the general public doesn't know this and then the congressman goes forth in his next election campaign and he says remember I worked very hard and was personally responsible for getting additional equipment for the base here and uh and he gets a certain amount of political points with some people for acting in that way so so the national guard is not inconsequential I've already mentioned congress and the key committees there uh the defense contractors of course some of them do hardly anything but military contracting they're very specialized in that line of work and companies like that indeed turn out when they try to do other kinds of work to be very bad at it because the kind of skills you need to be a successful dedicated defense contractor completely different from the kinds of skills you need to be commercially successful somebody like uh Lockheed who relies very heavily on military contracts to make money doesn't have a clue about how to do anything entrepreneurial in a real market but they know everything about how to find out what the Pentagon might be led to want as one of the generals once said the contractors are where the babies come from we tend to think well the general sit around and dream up these super weapons and then they go out and look for contractors but in fact it's just the other way around uh Lockheed and Boeing and Martin Marietta are out there full of uh full of evil geniuses in computer science and retired admirals and they're sitting around dreaming up the super weapons of tomorrow and when they get one in their mind fairly firmly so they can draw a picture of it then they go give a presentation at the Pentagon and say gee whiz wouldn't you like to have something like that and the generals say go golly that looks that looks great you know can you cook that up sure you know 50 billion and it's yours so uh this is how the the process tends to operate and as I just suggested there there's a revolving door and has been since world war two whereby high ranking military officers when they retire go directly into employment in defense contracting companies uh thousands and thousands of them have done that uh low ranking too of course but but the low ranking ones tend not to affect policy they just get jobs but uh but you find thousands of people who were colonels or higher moving in to work for Boeing and and Lockheed and General Dynamics all the time it happens every year new ones are brought on board and they and they're not there to tell these manufacturers how to reduce the cost of machining parts they're there because they know the system and because they know the guys at the Pentagon who are still dealing with procurement after all those guys used to work for them so now when they go back to cut a deal with military buyers that they're working with old friends sometimes old friends of decades longstanding uh and and people who used to be under their command in the military so what could be nicer than that no wonder general Mullins call this a family affair it's exactly what it is the military often thinks of itself as a big family we're just all here on the base together uh so the procurement system is a very much old boy uh greased setup uh it goes through the motions of being a business and it fills out forms and everything but the reality is quite different the reality is a lot of schmoozing and a lot of people trading places not just officers going into the firms either firms giving leave to their highest executives who then for a year or sometimes four years go take up positions in the civilian bureaucracy at the department of defense or one of the military departments so all of these uh these guys uh uh who who moved to the pentagon they're smaller in number than the number of officers who go the other way but in some ways they're more important because they all go to high ranking positions you don't leave Boeing to go work as a flunky in the department of defense you go there as an assistant secretary or something of that level so they go there they're very important and once again now they're working for the government dealing with people on the business side who used to be their colleagues last month so the whole system is is uh incestuous in the extreme and the the setup designed to give it the aura of bureaucratic punctiliousness is a fraud that's all fake and we've got some some peripheral actors down here i i just listed for completeness and we could go on with that list if we wanted to universities think tanks of course around northern virginia and mariland it's the beltway bandits are are thicker than uh than fleas on a hound and they're all living off defense money channeled to them by the department of defense or the the military departments or one of the intelligence agencies so so they're there local governments if they have a base or a big defense plant they get involved labor unions if they have a lot of members working in defense production and the veterans and service organizations who are numerous come into play as cheerleaders and people who can be counted on to always give a kind of general support for enlarging the military budget they just instinctively favor that no matter what the situation or no matter how outrageous the proposal they always say well yeah more money for defense is a good idea uh kind of a faux patriotism comes into play but but it's better than that because it's organized they have conventions they have lobbyists they continue to have connections with active military officers who come and you know give them inside scoop and and make them feel as if they're still involved and so uh so so they play a role even though it's a a peripheral role okay well this setup has has been operating now for over half a century and along the way a lot of money was put at its disposal i uh i calculate that since 1948 uh coming up to the present if we measure defense spending in current dollars we're getting into the neighborhood of 17 trillion dollars that's you know almost two years gdp of the present us economy that's a that's an enormous amount of loot i mean most countries in the world gdps could be swallowed up in there many times over so this was a a big undertaking and it's a big undertaking today if congress gives the president what he's requested for the next fiscal year the defense budget you know the it will be 400 billion dollars and and the the merest babe can forecast that it'll actually be more than that because that's not going to include enough for all the expenses in iraq and surrounding areas and they're going to have emergency supplemental appropriations requests and and they're going to get them okay because congress is really a pretty easy touch when it comes to the defense budget whenever there's a crisis and right now with the war on terrorism providing the important cover the administration is in a position to get congress to approve big infusions in the late nineties the fallback of the defense budget uh was considerable and by the end of the nineties the defense was consuming only about three percent of gdp but already just in the last three years that's gone back up to three and a half percent and rising so even though the cold war is over the permanent war uh is still going on now i don't know last night was dr strangelove shown uh it was shown earlier in the week okay well good i always recommend that film it's uh it's the greatest film ever made of any kind and especially in this respect it's uh it's the perfect representation of the situation during what you might call the high cold war the 50s 60s period of nuclear standoff and and there's there there's so many things that you can learn from dr strangelove that i i i couldn't even begin to list them all i uh i'm still learning from it myself after all these years and i expect to view it many more times before i die and learn something new every time so keep watching dr strangelove and as you do so you'll understand better and better the world of the high cold war it seems like a kind of other world a kind of mad world that couldn't really exist it's just a movie but the beauty of it is it's not really just a movie at all it's that far away from reality just that far when vietnam war engaged the united states after 1965 we had a another periodic crisis that pumped the defense budget up for three years running brought it up to almost 10 again of gdp by 1968 after the peak then it started falling and there was a long period of of about a decade during which defense spending fell relative to the economy and then at the end of the carter administration before regan took over and set his defense build up in motion a turn had already been made and defense spending was beginning to rise even relative to gdp but of course regan accelerated that increase considerably and during that build up defense spending was increased by 50 so it's it's very easy to spot on a time series a big build up and and it's one that we can't associate very easily with any any specific war or crisis there was no major major war connected with its onset but but there there were events that made mighty contributions to giving it a boost at at the beginning and and those were principally the soviet invasion of afghanistan at the end of 1979 and even more important the hostage-taking in tehran i have never in my lifetime seen so many americans so hysterically angry as i recall them being in 1980 they felt frustrated every night the television showed these americans being paraded out blindfolded and pushed around by the hostage-takers and and americans watched this night after night after night and they felt as if their noses were being rubbed in the dirt by people and they weren't doing anything about it and many of them became extremely angry and and wanted to lash out and as the saying goes nuke the bastards and i have no doubt that many would have been quite happy at america chosen to drop atomic bombs on the iranians in 1980 but cooler heads prevailed and eventually of course that crisis was resolved but meanwhile the defense buildup had been given a huge boost and even though the public lost faith after a couple of years in the buildup the reagan administration was so relentlessly dedicated to it that it managed to keep it going for years after the public had stopped favoring it very much here we've got defense spending in constant dollars from 1940 to the early 1990s and then i've added a few points later to show you what what happened subsequently but uh but you'll notice that there's a there's a kind of the classic cold war plateau which in this uh in in this level of purchasing power 1991 dollars tended to run close to 300 billion a year and then around that level cold war trend we have these deviations associated with the korean war there you see the big buildup and then it only comes back a little bit because now we've got the real cold war going it stays this way and here's dr strange love right here and then we've got vietnam the fall back to the late 70s the reagan buildup and then we've got this fall back in the 90s but but now we've begun i don't show it here but we've begun another turnaround and just in the past four fiscal years uh spending has increased by more than a third in real terms so we're often running for another buildup right now here we see how many people were getting a job from this activity in terms of millions of persons uh the dark part is military personnel the next section is department of defense civilians and then on top the defense industry workers so you can see that all together during the classic cold war we tended to employ maybe six to seven million people somewhat fewer here closer to five or six million in the 70s and 80s uh although it got close to the old totals by the end of the reagan buildup so this is a big chunk of the work that's getting done in the united states over half a century now we did see some changes in the political complexion of the cold war starting in 1968 and they took place very suddenly what i'm showing on this chart is a measure i constructed myself by using public opinion survey data uh for many years going all the all the way back to the late 1940s gallop and roper and these other survey organizations would often ask people when they were making surveys do you think uh the us should spend more for defense or less for defense or about the same as now and that question in almost identical form was asked again and again and again i found uh altogether 193 surveys at which were national which asked that question in almost identical form and which lacked any cues they didn't have any introductory phrases about you know in view of the soviet menace or anything that might have biased the respondents toward an answer and i took all of those data and in any given year i just averaged all the different ones in a simple fashion if i had several and by the 70s and 80s every year had a number of such surveys available so those data are are more solid but whatever i had i created a variable called the opinion balance i simply took the percentage of people favoring more defense spinning and subtracted the percentage favoring less now if people favored the same as now or if they express no opinion they're not playing a role here in this variable the number in that third category i call the residuum and in my statistical work i actually use that measure of residuum because it actually is a kind of measure of the inertia in the expression of public opinion if there's a big residuum then you would not expect any given opinion balance to have much political import compared to if almost everybody has an opinion then the balance has more punch but just from what i've shown here the the opinion balance itself you can see that up until 1968 every time that question was asked the balance was always to some extent positive always a greater percentage of respondents said more defense spinning than said less unbalanced opinion balance in some years crisis years like here is 1961 and there was a transitory berlin crisis that year and that clearly led a lot of people to favor increase in defense spending at the beginning of the vietnam war you'll see here in 1965 66 67 that balance remained positive in fact there was quite a lot of support for the american involvement in the vietnam war in those first three years it was just a few college professors and hippies you know and bob higgs who were opposing the war but the massive americans thought yeah they say it's a good idea president johnson says we've got to resist communist aggression in vietnam so okay let's do it now what happened is uh is first of all as casualties began to mount people of course began to lose their enthusiasm for what was happening there there's a wonderful book by john miller called war in public opinion in which he tracks what happens to public opinion as casualties change in the course of war and when you look at both the korean war and the war in vietnam it turns out that every time casualties increased by a factor of 10 the public opinion favoring the war drops by 10 percentage points and it's the same statistical relationship in both wars interestingly even though in korea we didn't have street demonstrations and so forth we still had growing opposition to the war people were just expressing it more privately how much did it drop for every factor of 10? 10 percentage points so so what happened here was that already the the support for the war and in this case support for military spending a kind of proxy closely related to that support is down to a low level in 1967 already but then it takes a precipitous drop it's the one of the biggest drops ever measured in public opinion surveys in 1968 and and the reason for that was that the Ted offensive at the beginning of the year made people realize that they'd been lied to all along that the government had consistently been telling the public that we were winning it was just a matter of a little more time before we had eliminated all these you know a handful of guerrillas in the jungle we had them on the run we controlled all the cities and then suddenly there they are they're running around in all the cities killing americans i mean right in the middle of things in Saigon and and the public said wait a minute we we've been led down a path here you've tricked us and support for the war collapsed among the general public and when it collapsed among the general public then the politicians began to to bail out first of all some members of johnson's cabinet and advisors to the johnson administration decided that it was a losing proposition that they should terminate it and the president himself realized that in the circumstances he could not be reelected he had reached the point where he couldn't even travel around the country because everywhere he went so many protesters turned out and he feared for his life that somebody would kill him so he callered in his quarters and wasn't even able to make public appearances so johnson dropped out and nixon was elected promising that he had a secret plan to end the war well it was very secret it's so secret that it that it took five years to be carried out but but at least nixon did i guess begin the turnaround of diminishing the extent of the military engagement there it is just that he wasn't prepared to just walk away from it yes i saw some historical film footage where nixon basically admitted that there was never any plan at all yeah well i i think that's true that the the expression we've got a secret plan was was baloney but uh but they they certainly did a lot of diplomatic scheming and henry kissinger was a very busy boy for years working on this but uh but it did take years before they arrived at this paris peace agreement now when public opinion collapsed it had an effect and what what i show you here is a a on the top that same public opinion balance i was measuring with the bar chart in the previous display but below it here i'm measuring on this left hand scale the rate of change of defense spending and as you see uh there there is a very close association in the two profiles their movements are very closely connected and i i did a variety of econometric tests to find out what was leading what and to work in controls for the opinion residuum and and to check all kinds of functional forms and so forth so i so i i rang the econometric changes on this baby and i'm satisfied that what was happening here was that with some lags changes in public opinion were were being followed by changes in the rate rate of growth of defense spending now the uh the easy way to interpret this would be to say wow public opinion is just as powerful as david hume said public opinion is decisive in the end when uh when people uh decided they wanted less defense spending then defense spending began to diminish at least in its rate of growth and actually became uh negative in its rate of growth here's a zero line here so by the time we get in in some portions here we're not really growing at all to any sick significant extent at least but uh it's not that simple and it's not that simple because public opinion is not simply what the econometricians call an exogenous variable it's not something that's just determined out there in the world somewhere and then brought to bear on the political process and certainly when we talk about the operation of the mick we have to recognize that everybody from the president and his national security council down through these vested interests of the mick itself are actively engaged at all times in attempting to determine what public opinion will be to shape people's beliefs and preferences about national security affairs and so it's even possible that the very public opinion to which the military apparatus seems to be responding has been created in the first instance by that very military machine now uh I don't want to suggest that that's quite it either because if you if you look at what happened there are periods such as after 1968 for a decade and there are periods in the 1990s when indeed there are substantial reductions in the resources being devoted to military purposes and I think it's fair to presume that those were not desired by the members of the mick and sometimes not even desired by the president and his and his chief ministers either and yet they were forced upon people so I'm not suggesting that that these people pull all the strings but only reminding us that public opinion is not exogenous in the political process there is continual give and take between members of the public who come in all sizes and shapes and degrees of influence and information and members of the government who similarly differ in all sorts of ways and they're interacting trying to influence one another's beliefs and preferences constantly and so what happens is the net result of all of these forces going one way then the other on some occasions clearly the forces supporting military buildup are dominant and we get the buildups on other occasions the forces opposing buildup are dominant we get military cutbacks so we do have a relationship here but it's a it's a tricky one to interpret I did make some efforts in later work to try to to build more elaborate econometric models to try to capture some of these intricacies but those were never published or or reported and and indeed they never proved very satisfying to me either in trying to make sense of them it's just a complex situation so I think there's a limit at least to my powers to to pull it all into some tidy picture well let me stop at this point we've got quite a bit of time left in the session for questions and comments yeah Bob did the Soviet Union have an analog to the myth or was their system so different that it wasn't really common no they had very much an analog and in some ways that's what the Soviet government was it was just the myth ran the place we tend to look at it and say it's a planned economy but the Soviet Union was above all else for its entire existence just a big military organization and in fact when we think of we all know it was a failure in many ways but but in the ways that we can identify it it's having succeeded they all turn out to be just technical military ways defeating the Nazis in world war two that's just a military undertaking developing ICBMs and big rockets and all that that's just a military task so so the only things the Soviets ever ever had to show for themselves that were were genuine accomplishments were military and they they put all of their best resources their scientists their engineers their educated people all were focused on the mick over there they don't have a congress muddy in the water of course but they have a military and an industrial side working together and a party apparatus which for them was kind of serving the same purpose as our executive and congress over here brad something just about that yes said about the soviets i just read i chose freedom and he was one of the first soviets to defect and he defected right after the war and he makes the claim in his book that um that in fact it wasn't the russian military machine that defeated the nazis that it was the german military machine that defeated the nazis because germans came so far into russia and they were surrounded and the russians captured the tons of german armaments and they used german armaments to defeat the germans so he claims that their war machine was was a disaster that they didn't have any of the materials the raw materials the melds or anything to make any arms or anything so that they had to use the german armaments to defeat their to defeat them so that didn't even that's pretty to some extent that they didn't produce fun yeah they they got the bulk of the punch from their own making i mean that obviously helped them that they were able to snatch so much german equipment at stalingrad but but they they shed the blood and you know they won the battle stalingrad that's how they got that stuff to begin with so that they deserve some credit they they paid a hell of a price at stalingrad brad um i'll have a question for you but just real quick about i'm hearing malta not in the cost of war books but in the cost of war tapes he hasn't talked about the russian military military complex and how it was the russian economy um but it's hard to get you know and you worked in them in the mick and you it's hard to get uh your mind around this monstrous organization especially since they try to sort of mimic the market um but at one point you know far enough back in the stages of production they do have to face prices somewhere i mean i mean in world war two they could just another time they can just confiscate things yeah but way back at some point they have to face prices they have to entice people through incomes to join they have to buy raw materials right after that though would you say it's true that they really don't i mean i would think that after that point where they're initially by the raw materials from people who could sell it to other to private interest just well after that there is no economic capital it's all that they may try to copy things but well yeah the the the arms manufacturers have to to pay for their materials and the people they hire of course and they they are in competition with with market actors in doing that but they still don't have to pass a market test in the same way that market firms do because let's suppose that they go out and they they conduct their business and and they lose money now if you do that for some time running in the market you're just going to have to go bankrupt your creditors will ensure that but in the case of the big military contractors it's almost certain that you won't actually be allowed to go bankrupt because you'll be bailed out and you can be bailed out in a number of different ways you can be bailed out directly the defense department can just give you additional money and there are any number of accounting entries that can be done under they are constantly readjusting contracts and so you can do it in the guise of engineering changes you can do it in in the guise of adjusting for for earlier failures to to anticipate full costs of production there are any number of names you can give it or one of the ways that was frequently used in the Cold War is that that a company's floundering and it's it's on the verge of going broke well give it a brand new contract to do something and shower it with a lot of advanced payments so that puts it in a flesh condition again and it's off and running so the bailout guarantee was absolutely critical in the operation of these firms at one time or another they all got bailed out Lockheed Martin Marietta they all got bailouts in a big way at some point and many of them got repeated bailouts so so they're they're in the market to be sure and they they have to make payments to market actors in order to acquire resources but they don't have to to meet a bottom line test in the same way that a commercial firm must yes sir um i've heard people make statements that like uh the Cold War resulted in the in their technology and because of the competitive right existed between capitalism and socialism and i've heard criticism of this thing that you can't compare that to the the existence that didn't exist in two capitalist structures were the competing for one another what are your thoughts on that well a lot of people have argued that there were there were technological gains as a result of the Cold War because they did actually put a great deal of money into research and development and they developed a lot of new things uh now uh almost all of them of course are are designed for military applications now what people argue is that even though designed for military applications they could be adapted to civilian uses and therefore they had value as new innovations in civilian application and you can find plenty of examples like that you know after all they spent hundreds of billions of dollars they're bound to create something at some point that that that has enough flexibility to be useful in other areas uh they they designed uh for example the the first successful jet airliner the Boeing 707 was actually designed as a tanker and they pretty much just took the tanks out and put seats in and that was the 707 and uh they developed various techniques and materials and uh and you can accumulate a gigantic list of examples but again the question is this is what we see what is unseen if we hadn't been using resources in these purposes uh what might we have produced with those same funds those same resources aimed directly at producing something beneficial to the civilian economy and just as a general principle it makes sense to suppose that if you if you directly try to produce useful profitable commercial items you'll get there quicker than if you rely on on producing such things by accident while working on military projects so i i i think the the argument has always been used as a a kind of propaganda to suggest that we don't have to worry that we're squandering resources when we use them on the military because it has all these great spillovers i i i think the value of those spillovers is vastly overrated and and it's bad argument anyhow because it neglects opportunity cost yes sir plus all those engineers are being used to make war things instead of cities sure they're one of the most important resources that we're using here uh throughout the cold war a big fraction of all american scientists and engineers were engaged in the mick uh in some cases if you look at say physicists a majority of them a big majority of them we're working in the military uh and whenever there's a big military cutback we'd find these highly skilled scientists and engineers you know being thrown in sometimes into work that seemed way below their level of training and preparation and often was but but you know there's not that much demand for physicists outside the world of military r and d big percentage of like college students in america who are in engineering and science who are not of foreign descent are in r tc yeah big percentage i can i can understand the physics department or engineering department you see a lot of foreign students most now but the ones who are americans a lot of them are right yes sir also the prices of things uh you can see how they've been really looking at it around like when christmas back throughout the day had a contract for a thousand uh maybe it was aprons yeah and a million dollars each yeah and within three years they was doing all kinds of funny things it was the same thousand but now it's three million right right yeah that's right airplane we had was cost cost 350 thousand dollars thanks for the airplane next thing you know it's uh like it's being replaced by a one million dollar airplane from 350 that's one million yeah and it was eight million and it was within just something like 20 years it had gone from the three hundred and forty thousand dollar thing then yeah 25 million one of the uh places where you always see that kind of huge run up in unit costs uh is when uh they have a stretch out uh normally when they plan these weapons programs they'll they'll plan to produce a certain number of units over a certain number of years and then if a congress in its wisdom gets involved and and sees the end of the production run looming and the closure of the plant there in uh there in long island they they they may micromanage the defense budget to provide that that Grumman should produce another 12 a sevens this year I know about that airplane in particular because I studied it for an article I wrote and so they're they go on producing a handful of items on a production line really designed to produce dozens or even hundreds of units a year so they've got a lot of fixed costs that they're bearing as they continue producing but very few units being produced so just to cover their costs they have to charge a lot per unit and so the navy in that instance ends up paying three times more for each airplane than it was paying two years ago and uh and this this is just another aspect of the waste that congress injects into what is already a wasteful process very well uh thank you very much