The Economics of the
National Security State

excerpted from the book

The Real Terror Network

by Edward S. Herman

South End Press

The development model espoused by the leaders of the National Security States (NSSs), (and their external business and intellectual allies) is a free market model which allows for a government role only in creating a favorable investment climate. This may include subsidies and tax concessions to business firms, which increase their willingness to invest, but it excludes any largess to the non-propertied classes, which would worsen the investment climate. For the leaders of NSSs the end sought is not human welfare; in Cardoso's words, "bureaucratic-authoritarianism was not launched to assure the well-being of the people. The explicit aim is "national power," although, no doubt coincidentally, the immediate and only observable beneficiaries are the ruling economic and military elites. According to the NSS development model, the national welfare (= national power) is best served by rapid economic growth. Rapid growth, in turn, requires extreme generosity to entrepreneurs, local and foreign, operating under free labor market and business entry conditions. Free labor markets means an atomized or nonunion condition or unionization under government control and a plentiful "reserve army" of workers. It is assumed that free business entry, which includes that of foreign firms, will stimulate a restructuring of industry and agriculture in accordance with comparative advantage. It will also presumably induce capital to exploit domestic resources fully. GNP growth and national power will thus be maximized.

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The observed income distribution effects of NSS development are exactly what we would expect from a growth process controlled by small elite minorities who have resorted to machine guns. There has been a major trickle-up, and even where GNP growth has been rapid the impoverished majority has in most cases derived marginal benefits at best. Latin America has an exceptional degree of inequality of income distribution, in comparison not only with less developed countries in Europe (both capitalist and socialist), but even in contrast with the Less Developed Countries (LDCs) of Africa and Asia. Central America may be the world leader in inequality, with the lower 50% of income receiving units getting only 13% of all income and the upper 5% obtaining a staggering 35% of total income in the mid -1970s.

In the advanced countries there was an increase in inequality during the early stages of modern industrial growth, but inequality diminished in most of them during the twentieth century. In Latin America, growth has not led toward any noticeable trend toward greater equality even over long time periods with high growth rates. There was an interlude of modest reduction in inequality between 1930 and 1950, based on a reduced rate of growth (and a relatively great fall of profits), a spurt of trade union growth and power, and an increase in welfare state benefits. But the post-1945 era of more rapid growth brought with it a sharp turn once again toward increased inequality, a repudiation by experience of the notion that growth and higher per capita income would surely reduce the massive inequalities of the old order. A huge 400% increase in GNP in Latin America between 1950 and 1975 was accompanied by a sharp increase in inequality, and in circumstances where very large numbers were still hungry, malnourished, and suffering from curable illnesses, and where many were experiencing absolute reductions in real income. The trickle-down effect in Latin America has been modest at best, even though those at the top, who keep getting the bulk of any gains, are well-off even by U. S. standards, while those at the bottom are in dire straits.

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In NSS budgets, military expenditures tend to exceed those for both education and public health, despite the absence in most cases of any external security threat and despite the huge deficits in education and health that would press for solution if human needs were given any serious weight. Thus a sample of 10 NSSs in 1978, with the data probably understating military-related expenditures, shows that for seven of the ten states military outlays equaled or exceeded education expenditures; for nine out of ten military expenditures exceeded public health outlays. This is a dismal record even in comparison with the more militarized democracies of the west; and it suffers by contrast with socialist states. In only three of the eight socialist states of Eastern Europe did military outlays equal or exceed educational outlays; and in only in five of the eight did military expenditures exceed public health outlays.

The Third World client states of the west contain vast pools of human misery that persist and even grow in absolute size. The International Labor Office (ILO) estimates that a huge 73 million people, or 27% of the population of Latin America, could be classified as "destitute" in the early 1970s, with destitute defined as having a per capita real income of $90 or under per year. An enormous 118 million Latins (43% of the total) were "seriously poor," meaning with a per capita income of under $ 180 per year. The ILO also claims that the absolute number of destitute people increased in Latin America during the growth decade 19631972. These extremely low incomes for scores of millions are associated with high rates of unemployment (or underemployment), low levels of food intake and high malnutrition rates, poor health care services and high levels of preventable and curable diseases, poor educational facilities and high rates of illiteracy, and high mortality rates.

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Real Terror Network