Rent Seeking during Wartime: A Smithian View of Military Action

This from the Wall Street Journal:

“Lockheed Martin Corp. spent nearly twice as much on lobbying during the first quarter of 2009 as it did during the previous three months as it aggressively campaigned to save key weapons programs ahead of a budget shakeup in April.

Lockheed — the Pentagon’s biggest contractor by sales — spent $6.41 million during the first quarter, up 97% from the prior quarter’s $3.26 million, according to company filings analyzed by the non-partisan Center for Responsive Politics”

Adam Smith believed that British Imperialism was bankrupting the country. He believed that most of the time the cost of the action was much higher than the benefit for the public. This is an area of research I have done a lot in. Scholars from Hobbes, Sumner, Cobden, and Schumpeter have all concluded at one time or another the companies that benefit from war either foreign or abroad will lobby the government for the exclusive contract. This is no different than domestic lobbying from teachers unions to Department of Education. The lobbying will allow the politicians who support more war actions to stay put in place. This is likely why the Democrats have not been as strong in their actions as they have been in their rhetoric.

Lockheed Martin gains a lot of money from military action. It is in their best interest to do so. This is not to put complete blame upon the Corporations. They would not have the power to do this if their wasn’t a politicial system willing to allow this. This is why many Republicans will not talk about this. They are too afraid of abanding their business and corporate roots.

War is very costly. If the political system was not set up in a way in which allowed the benefits to be concentrated while the costs were spread out, we wouldn’t have this problem. Corporations, at stand alone, do not go to war with each other. We never see Coca-cola buying mercenaries to fight Pepsi. This is because they then have to face both the costs and the benefits. As long as their is a politicial system like this, there will be a chance of rent seeking to benefit from war.

The rest of the article is here.


Published in: on May 14, 2009 at 12:33 pm  Leave a Comment  
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