The Political Economy of War, Peace, and the Military-Industrial Complex

This edited volume reprints the papers that appeared in a 2024 symposium published in The Review of Keynesian Economics (Volume 12, Issue 3). As the title of the volume indicates, the papers address various aspects of war, peace, and the military-industrial complex. Like many edited volumes the chapters can be read independently meaning that readers can focus on the specific selections that align with their interests. 

Three of the chapters are broad in their approach and speculative in their conclusions. Jeffrey Sachs (“Beyond the Age of Hegemony”) discusses the waning global influence of the United States and lays out three alternative scenarios—(1) Armageddon via nuclear war, (2) a divided world with tensions, between the U.S. and its allies and China and its allies, and (3) a multi-polar world with numerous centers of power which coexist peacefully through a network of formal and informal arrangements. Sachs holds out hope for the third scenario while acknowledging that realists will view it as naïve. For readers interested in alternative forms of governance for fostering peace, Sachs’s chapter serves as an invitation for exploration of what that might look like at the international level.

Next, Robert Skidelsky (“Political Economy of Peace and War”) offers a high-level survey of debates about the political and economic aspects of war. This includes debates over whether political or economic factors are more important for war or peace, and the type of political-economic relationships more or less conducive to war. His main prediction is that—“economic life everywhere will be progressively reordered on the basis of ‘war economy’ and political life on the basis of ‘national security’” (p. 17). His chapter raises the important concern that liberal economic policies are being threatened by politics related to military goals, elevating state power and control over both the polity and the economy.

Wolfgang Streeck (“Notes on the Political Economy of War”) discusses some of the key aspects and dynamics of war. The title of this chapter is an accurate description as Streeck offers a collection of thoughts on war rather than a systematic analysis centered around a core thesis. There are nuggets of potential interest for the reader with the patience to sift through a broad assortment of general ideas.

The next two chapters focus on the political economy of the military-industrial complex (MIC). Thomas Palley (“The Military-Industrial Complex as a Variety of Capitalism and Threat to Democracy”) offers a detailed overview of the MIC, paying careful attention to both its economic and political components. He argues that the MIC is a variety of capitalism that he terms the “Poly-Industrial Complex” (PIC) to capture the foundational role of politics in shaping the capitalist system. In this rendering, politics is not separate from the economy, but rather entangled in a foundational manner. He also discusses how the effects of the MIC go beyond the military sector, threatening political and civil liberties. This comprehensive chapter offers a variety of avenues for future research, especially those working in the traditions of Austrian economics and public choice economics (F.A. Hayek, Gordon Tullock, and William Niskanen are all referenced in the chapter, but there is much more to be done).

Next, Cecilia Rikap explores the relationship between the U.S. National Security State (US  NSS) and major technology firms with specific focus on artificial intelligence (“U.S. National Security State and Big Tech”). Her chapter traces the history of the US NSS as a big player in the planning and financing of research and development. This influence, while still relevant, has waned with the rise of U.S. Big Tech companies, which invest a significant amount of private resources in research and development. Rikap provides an interesting discussion of the interplay between the state and private technology firms, resulting in what she calls a “frenemy relation” characterized by aligned interests on some margins and tensions on others. She ends with a call for “democratic AI planning” to ensure that innovations in artificial intelligence are for the common good. The specifics of this idea are not presented in detail, making it difficult to evaluate. It would be important to consider the political economy aspects highlighted in Palley’s prior chapter to consider how such an arrangement might undermine democratic ideals and the “common good” (assuming that concept has any concrete meaning in practice) rather than advance them.

The final four chapters explore various aspects of global economic activity in relation to war and peace. The contribution by Emiliano Brancaccio, Raffaele Giammetti and Stefano Lucarelli (“Centralization of Capital and Economic Conditions for Peace”) offers a formal theoretical model of capital centralization under a capitalist system. Taking Marx as inspiration, the chapter is motivated by the idea that a capitalist system contains endogenous processes through which capital is increasingly centralized in the hands of small number of capitalists. This can foster imperialism as parties seek to both obtain capital and protect it from threats. The majority of the paper is a presentation of a mathematical model exploring the theoretical conditions under which capital centralization contributes to international tensions. 

With any such approach, one wonders to what extent the outcome of the model is the result of the numerous, and often significant, assumptions made to gain analytic tractability. One also must wonder whether capital concentration, to the extent it exists in reality, is the result of economic (capitalist) factors versus political factors. As Robert Skidelsky notes in his chapter earlier in the volume, “politics has always been the senior partner in the political economy chariot” (p. 11) and that “economic policy has been adapted to demands of geopolitics” (p. 17), suggesting that political factors drive economic policy, and hence outcomes related to war. 

This also matters for the conclusions drawn by the authors. Based on their theoretical model, the authors call for “An appropriate institutional framework to implement such interest rate regulation at the international level, including economic policy coordination, controls on capital movements, and a broader policy framework for international financial relations and related imbalances” (p. 105). What would such a regime look like in practice if we draw on the insights from Palley’s chapter including his concept of the “Poly-Industrial Complex”? What epistemic and incentive requirements are necessary to bring about the outcome presented by the authors?  

The chapter by Keyu Jin (“Navigating Geoeconomics in a New Era of US-China Relationship”) explores the various tensions between the United States and China. These tensions, she argues, are not just about China getting wealthier, but also are the result of the country gaining a competitive edge in certain aspects of technology, which are viewed as a threat by the U.S. government. She concludes that navigating these tensions will require “a new international architecture defining parameters of technological competition and the scope of collaboration and governance in areas such as AI and data protection” (p. 120). Like Sachs’s chapter, an important takeaway from Jin’s contribution is that tensions between governments do not have to result in violence. That said, the details of her proposed architecture to navigate these tensions are absent from the chapter and remain to be specified.

In a similar spirit, Dani Rodrik explores a new “meta-regime for global order” (“Reimagining the Global Economic Order”). With the rise of “de-globalization,” Rodrik argues, an alternative international governance structure is needed. He highlights two prerequisites for a better order—the prioritization of domestic economic and social objectives to ensure inclusion, and the avoidance of global primacy by major powers. Rodrik’s proposed regime aims to thread the needle by creating conditions where nations benefit from international trade while leaving adequate space for governments to address domestic priorities. Whether individual governments have the knowledge and incentives to pursue his agenda is an entirely different question. He recognizes that governments look out for their own interests, but argues that “a secure, prosperous, and stable world order requires that these responses be well-calibrated, addressing national security without trying to dominate other nations” (p. 132). What “well-calibrated” means or how it comes about in practice is left unexplored and is central to the feasibility of any alternative arrangement.

Finally, James Galbraith analyzes the effect of sanctions on the Russian economy during the 2022–2023 period (“The Gift of Sanctions: An Analysis of Assessments of the Russian Economy, 2022–2023”). Western assessments of the sanctions, he notes, correctly recognized the initial consequences, including declines in business investment and production in some key industries. They were inaccurate, however, in terms of understanding the full structural implications. Sanctions, Galbraith notes, forced out Western competitors and reduced import dependence, creating profit incentives for Russian businesses. In this regard sanctions were a gift to the Russian government in that they fostered economic restructuring in Russia that would have not been possible through domestic policy. The result is the potential strengthening of Russia’s long-term economic position, contrary to the intention of the sanctions. 

One takeaway of this chapter is the importance of recognizing the limits of experts in both policy design and assessment. This lesson is important not just in the case of sanctions, but in government policy more broadly where even the most carefully designed policies can never do just one thing. As several papers in this volume indicate, this is especially important in matters of domestic and international military policy, which is defined by top-down government policy controlled by a small group of experts.