Hawker Beechcraft announced this morning they would begin additional furloughs for employees producing several models of their business jets. Employees producing one of their smaller aircraft have already been furloughed. The reason for temporarily suspending operations is a shortage in composite material used in aircraft design. The shortage was due in part to increased military production, which bid away the material.
This highlights so well the destructive impact on an economy that military spending has. Any capital that is consumed by the military necessarily cannot be employed by the productive sector. The process is referred to as crowding out, where government consumption pushes up higher prices or leads to shortages that otherwise wouldn’t exist. Another way of looking at things is by considering the opportunity costs.
President Dwight Eisenhower put military spending in this way when he spoke to the American Society of Newspaper Editors:
The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some fifty miles of concrete pavement. We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people.
We know that Hawker Beechcraft is a productive firm because consumers willingly pay for their products; we cannot say the same for the military, which collects its revenue by force. Similar to Bastiat’s broken window fallacy, what is ‘seen’ are the military jets produced and the people employed building them. What is ‘unseen’ are the aircraft that go un-built and the workers who sit idle, waiting for supplies.
