16173_2.5_000009444952XSmall

Military Business

by Elaine Schwartz    •    Feb 5, 2011    •    260 Views

Choosing between “guns and butter” (or missiles and margarine), national leaders think of the military for guns and the private sector for “butter.” Not Egypt, though.

As far back as the 1970s, when peace with Israel meant less to do for the Egyptian army, they redefined their role. According to an NPR report, the military decided to manufacture pots, process food, and make bottles for natural gas. A wikileaks 2008 diplomatic cable explained further that retired Egyptian generals ran “water, olive oil, cement, construction, hotel and gasoline” firms. The document said that the military built the road to Red Sea resorts while officers owned “large amounts of land…in the Nile Delta and on the Red Sea Coast.” (#j5)

Will the military’s economic stake affect their political decisions? Thinking of their opportunity cost, will they favor stability over turmoil? The wikileaks document says yes.

The Economic Lesson

Every economics text reminds us that scarcity necessitates choices. One traditional choice is between producing for the consumer and producing for the military. Whenever land, labor, and capital are allocated toward one, there is less for the other one. Choosing guns instead of butter was one reason that the former Soviet Union collapsed.

Economic growth, though, can enable us to produce more guns and more butter. One mid 1990s report suggests that fueling economic growth was the reason for the expanded role of the Egyptian military.

« »