Econ-Atrocity: Keynesian Militarism

By Jonathan Elsberg, CPE Staff Economist

A funny thing happened on the road to liberation. The U.S. military has discovered that high unemployment among Iraqis has a lot to do with the strength of resistance to the occupation. Those parts of Iraq that suffer from the worst unemployment are also the places where militant resistance to the U.S. and its allies is the fiercest. The U.S. military’s reaction is an overt, though painfully slow-going, policy by commanders in these battle-torn areas to create jobs for Iraqis, a sort of “Keynesian militarism.”

Keynesianism, named for British economist John Maynard Keynes (pronounced “Kaynz”), is commonly distilled into the idea that governments can and should pursue “counter-cyclical” policies. These are policies that aim to boost employment and economic activity when the economy is sagging, and to tone it down when it gets overheated, to avoid a disastrous crash. Keynes famously suggested that in the face of an unemployment crisis, the government should do almost anything to create jobs, even going so far as burying money in old mines and hiring people to dig it back up.

Keynesianism fell out of favor in the 1970s, both because of failures of government policies and from a strong surge of right-wing ideologies that culminated in Ronald Reagan’s election as President. Ironically, though Reagan preached the virtues of small government and free markets, it was his use of massive amounts of government deficit spending on the military that helped end the recession of the 1980s. Schools, AIDS prevention and renewable energy development might have been better uses for that money, but even so, his reliance on “military Keynesianism” did create many jobs, using the military to support the civilian economy.

In Iraq, the tables have turned. Now we see the military using economic strategies to help its war and occupation mission. While many Iraqi insurgents have anti-occupation politics in mind, there are others, along with burgeoning numbers of “ordinary” street criminals, whose use of violence has more to do with meat and potatoes than ideology. (Working with insurgent groups is one way for Iraqis to get desperately needed money.)

According to the Education for Peace in Iraq Center, “Ninety-one percent of Iraqis surveyed in a March 15, 2004 poll conducted by ABC News said that: creating job opportunities for the unemployed’ would be: very effective’ for improving security, far ahead of options such as hiring more police or increasing patrols.”

U.S. military leaders have taken some notice, though they’re having trouble with follow-through. NPR’s Anne Garrels recently reported that “commanders… are frustrated beyond belief that they can’t implement employment projects…. As one commander put it to me,: employment is the key to success at this point. If you put 10,000 Iraqis to work,’ he says,: there are gonna be 10,000 fewer willing to fight the U.S.”

Meanwhile, unemployment also contributes to crime and violence in the U.S. communities where it is severest. The connection between unemployment and crime has often been studied. Recent work includes that of Eric Gould, Bruce Weinberg and David Mustard, who find strong evidence that rising unemployment rates in the U.S. lead to rising crime rates, and vice versa for falling rates.

In May, 2004, the national unemployment rate was 5.6%, representing well over 8 million people. Washington DC’s rate was 7.5%, Flint Michigan’s was 8.3%, Stockton California’s was 9.0%, and Brownsville Texas’s was 9.2%. Of course, even these numbers hide the severity within the cities’ hardest hit pockets. Since unemployment is mostly concentrated in a few areas, these especially neglected neighborhoods are enduring socially destructive unemployment rates similar to those in Iraq. So if, though admittedly imperfect, Keynesian job creation policies have proven effective in the past and are the newest weapon of choice for the occupation in Iraq, why do U.S. politicians allow high rates of unemployment to persist at home?

At heart, the problem is that a capitalist economic system cannot exist without some unemployment. But the extent and harshness of that unemployment can be reduced. From Reagan’s enthusiastic declaration of defeat in the War on Poverty[*] through Clinton’s signature on welfare “reform,” U.S. government policy has shifted towards an acceptance of harsh poverty and unemployment. While a humane Keynesianism remains abandoned at home, a new Keynesian militarism is being developed abroad as the compassionate face of occupation and empire.

[*] “My friends, some years ago, the federal government declared war on poverty, and poverty won.” State of the Union Address, 1/25/1988.


Randy Albelda, Nancy Folbre & the Center for Popular Economics, The War on the Poor: A Defense Manual. The New Press, 1996.

Anne Garrels, “Iraqi Leader: Amnesty Offer Not for All Insurgents.” NPR, Morning Edition, July 13, 2004.

Eric D. Gould, Bruce A. Weinberg and David B. Mustard, “Crime Rates and Local Labor Market Opportunities in the United States: 1979-1997.” The Review of Economics and Statistics, Vol. 84, Issue 1, February 2002 [pdf].

John Howley, “The Iraq Jobs Crisis: Workers Seek Their Own Voice.” Education for Peace in Iraq Center, Issue Brief No. 1, June 2004 [pdf]. Quote is from page 3. Their citation for the poll is “Iraq: Where Things Stand,” ABC News poll, March 15, 2004.

U.S. Department of Labor, Bureau of Labor Statistics, Local Area Unemployment Statistics and Current Population Survey.

(c) 2004 Center for Popular Economics

Econ-Atrocities are a periodic publication of the Center for Popular Economics. They are the work of their authors and reflect their author’s opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.