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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

December 3, 2012 at 9:48 AM

Military spending: Opportunity costs

The story in today’s Seattle Times about China overtaking the United States as the world’s largest trading nation fits nicely with my Sunday column about the need for America to kick its military spending jones and make the transition to a peacetime economy.

To be sure, China has an advantage in low labor costs and an economic model that emphasizes stealth protectionism (one that resembles Alexander Hamilton, John Quincy Adams and Henry Clay’s “American System”). But the United States has spent the better part of a decade waging failed wars, as well as an amorphous “war on terror.” The cost so far: More than $1.3 trillion. The eventual pricetag may reach $3 trillion or even $6 trillion. Much of this was borrowed from China, which has been happy to see us bleed ourselves and alienate a vast swath of the world while it expanded its economy and soft power.

Like much of the world, China is a “free rider” on Pax Americana, especially on the U.S. Navy policing the world’s sea lanes and the 10,000-mile supply chain upon which Chinese exports depend. But most of the $700 billion we spend annually on defense doesn’t go to the Navy. It goes into sinkholes such as the troubled Joint Strike Fighter program.

Meanwhile, China’s rise coincides with continued declines in American household wealth and wages, as well as the destruction of numerous American industrial sectors.

The Military-Industrial Complex and our imperial adventures carry huge opportunity costs. In other words, what if we had spent $1.3 trillion on advanced infrastructure that created jobs and industries that couldn’t be offshored (with the right policies) and would more than repay their initial costs? What if we had spent it on funding schools, particularly in the poorest districts? On research and development of sustainable energy? We would be far better off and more competitive.

I’ll continue this theme on the blog this week.

And Don’t Miss: Farewell to Europe || Clyde Prestowitz

Today’s Econ Haiku:

A royal baby

Heir to climate change, peak oil

What’s the king’s speech now?

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