I’m fairly new to economics, so forgive me for my lack of knowledge in this field. Anyways, I sometimes hear that military bases brings prosperity to the surrounding towns, and that this is a boon to the economy. This looks superficially plausible, but I can’t help but think of the opportunity costs. Is this true? If not, how would one respond to such a claim?
Thanks!
Taking into account opportunity costs, military bases won’t make society as a whole better off, but it’s quite plausable and indeed highly likely that the area immediately around a military base would see increased prosperity at the expense of the general taxpaying population.
That is a very bizarre notion. I’ve lived beside a miiltary base for 17 years. An army base is very isolating. Personnel live in them like arcologies, guzzling taxpayers money away on a lush compliment of amenities exlusively subsidized for personnel. For example, the fitness center in this one has a special cheapo rate for personnel. Everyone else has to pay several times as much. I can’t imagine how it could have such an effect except maybe in some Vietnam type of place where they are bringing in relatively high spending compared to anything else that would normally occur in the area.
For instance, let’s say all the military troops abroad are brought home and stationed here in America. With the money they have they can go out and buy things in the local market which will bring business to the town. It seems plausible, but I’m not sure where I’m wrong or if I’m wrong? Oh and I hope I used the right tool to reply.
Of course it brings propsperity to the region where it is located. The same would be true of a counterfeiter set up shop and begin issuing millions of dollars of bills and spending them in his surrounding region. The region would experience a boom and the residents of the area would be enriched. Any government building, base or other center is a money faucet back into the private-sector. Of course, the faucet has to get its water from somewhere and that “somewhere” is the pool of real savings throughout the rest of the country.
Clayton -
That seems correct to me. A military base isn’t a business; they don’t bring any added value to the community by performing a specific service or producing goods (they provide national defense, but generally an area isn’t “safer” because a military base is close by). They do spend money, but that money could just as easily be spent anywhere else.
Thanks for that link!
Thanks for the replies, they were useful to my inquiry. I just have one other question, I suppose, but I may already know the answer. I’m trying to figure out what’s wrong with this reasoning: So in town A a military complex is set up, people from the town come in and develop weapons which gives them income to spend on other things in the town A or elsewhere. The people, say in town B, who receive the business from town A enjoy growth, ect., ect. Thus this bring prosperity, not only to the town, but to the economy in general. Am I over looking the fact that town A is financed by taxes, thus any benefit would be a loss somewhere else?
I think this answered it, thanks!
Not only is the incoming profit coming out of the economy elsewhere, but resources spent on weaponry do not increase the accumulation of capital. If $2M in resources are spent on a bomb, and then the bomb is detonated (in this example doing no monetary damage), then the economy has no more capital, and has lost all the resources ($2M including labor, etc.) that went into the bomb.
Incomes don’t go up around a domestic base in the long run. It shifts population and construction from other areas to that area. Maybe immediately after a base is built local retailers take advatange of demand by increasing prices. That won’t last long. Also, army pay is very low at lower ranks. The lowest level in the U.S. is like $500/month last I checked. Much of the benefit is payment in kind via base services.
Thanks for the replies. However, can you elaborate on this point? Why will incomes decline in the long run?
Thanks.
Yes. Basically, you’re considering the “ripple effects” of government spending but you’re not considering the very same ripple effects of government taxation. The money taken from the paychecks of the people throughout the country from which the military complex in Town A receives its funding is not spent on consumer goods that would otherwise have been purchased. Those retailers or producers who would have received those dollars but didn’t don’t have them to spend on capital investment, advertising, stock dividends, employee salary, etc. The government (all levels) consumes very close to half of total US GDP. This means that for every dollar an American spends, there is a dollar he could have spent but which was taken away and is now being spent on whatever the government decides to spend it on. It is impossible to reckon the ripple effects of this but the effect must be massive. If you’re a fan of command-and-control society, this is your dream scenario. But if you have common sense moral sentiments then the whole idea of an organization unilaterally seizing people’s property is simply immoral - even if there were no losses involved in the transfer of wealth from the victim to the seizing organization. A lot of the conservative pundit types get caught up in trying to show how inefficient the wealth transfer from private individuals to government is. But this is beside the point… even if it were done in a perfectly efficient manner, it would still be wrong.
And the supposed nobility of the causes on which the government spends its revenues is also beside the point. A multi-million dollar bank heist could not be justified on the grounds that all the money was donated to charities - how to spend the money that was stolen simply wasn’t the bank thief’s choice to make. And this is leaving aside the obvious point that the claim that the government acts on almost entirely altruistic motives (*"*we do it for the people") is as incredible as the thought of a bank robber who donates all his proceeds to charity.
Clayton -
More people will move into the area to open business, driving the prices back down. It’s more an increase in population than an increase in prosperity.