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Profits for the Economic Club: How US Military Spending Benefits the Few

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In his January 2016 State of the Union Address, President Obama smugly declared that “We spend more on our military than the next eight nations combined,” which was a startling and repulsive boast.  What is less surprising is the Pentagon’s decision to refocus military spending, thus boosting profits for military industry companies.

Then on February 2 Obama’s Defence Secretary Ashton Carter gave a speech on defense affairs at the Economic Club in Washington, which is proud of the fact that it provides “a forum for prominent business and government leaders who have influenced economic and public policy both here and abroad. Members represent over 600 businesses and organizations [in Washington, DC] that are at the forefront of the private sector economy.”

Having no sense of humor, Mr Carter would fail to see the wonderful irony in choosing that location to define his priorities in national military affairs,  but its significance didn’t escape the financial market’s wheeler dealers, and values of defense industry corporations received a hike all round.

In his speech Carter said that “the Pentagon plans to spend about $2 billion over the next five years to buy more Raytheon Company Tomahawk missiles and upgrade their capabilities, bringing the inventory of the missiles to above 4,000.”  At midday on February 2, Raytheon shares stood at 123.47.  By 4 p.m. next day they had increased to 128.07.

After his comforting chat to the Club of “prominent leaders” of military-focused commercial enterprises, Reuters reported that Mr Carter “flew to the Naval Air Weapons Station China Lake in California to get updates on new high-end weapons being developed and tested there, including precision Long Range Anti-Ship Missiles built by Lockheed Martin Corp. He said the [defense] department would spend nearly $1 billion over the next five years to buy the new missiles.”

The effect of the announcement on Lockheed’s shares was intriguing. At 10 a.m. on February 2, just before the Carter statement, they were at 208.87 — and by 2.30 p.m. on February 3 they had gone up to 213.53.   It’s interesting to reflect on who might have made a profit.

As Forbes relates, Mr Carter had been “a consultant to defense contractors and when he went back to the Pentagon in 2009, he had to get a special waiver because of his work for companies like Mitre Corp, and Global Technology Partners, a defense consulting firm. As The Washington Times points out, that background seems to conflict with the president’s pledge to block the revolving A History of the Pakistani Army by Brian Cloughleydoor between federal employees and special-interest groups.” Mr Carter was a Senior Partner in Global Technology, which “is a specialized group of investment professionals who have formed a strategic relationship with DLJ Merchant Banking Partners  to acquire and invest in technology, defense, aerospace and related businesses worldwide.”  What goes around, comes around.

According to the Stockholm International Peace Research Institute (SIPRI), in 2014 (the most recent year for full figures) the US was responsible for 34 per cent of the world’s military spending.  It spent three times as much as China and over seven times as much as Russia.  Certainly, a vast amount of US taxpayers’ money was squandered on the Pentagon’s futile war in Afghanistan, in which the US-NATO military alliance failed to defeat a few thousand raggy-baggy militants; but there is still an awful lot of cash available to buy hugely expensive new equipment of all sorts. As noted with lip-smacking satisfaction by Zacks Equity Research, “Pentagon 2017 Budget Plan Puts Defense Stocks in Focus.”

Given the Pentagon’s withdrawal of troops from Afghanistan (it having been calculated that each of the many thousands of armed forces personnel in that unfortunate country “cost an average of an eye-popping $2.1 million” a year), there should be massive reductions in military expenditure in 2016.  But the drop in Mr Carter’s spending estimate is extremely modest — although it might eventually show that the US will spend only as much as the next five or six countries instead of the next seven or eight.  Perhaps the next President will boast about that in her first State of the Union Speech.

Mr Carter told the Economic Club that “the Pentagon would seek a $582.7 billion budget next year and reshape spending priorities to reflect a new strategic environment marked by Russian assertiveness and the rise of Islamic State.”

“Russian assertiveness”? 

It is Mr Carter’s Pentagon that is indulging in confrontational military “assertiveness” all around the world, in every region and ocean, operating from hundreds of military bases that are thousands of miles away from the borders of the United States.

Mr Carter was reported as saying that “the Pentagon would ask for $3.4 billion to boost military training and exercises aimed at reassuring European countries concerned about Russia, which seized Ukraine’s Crimean peninsula in 2014 and has worried NATO allies with its strategic bomber flights.”

He ignores his own spokesman’s proud declaration that “We conduct B-52 [strategic nuclear bomber] flights in international air space [around China] all the time,” and that the US operation “Polar Growl” of B-52 jaunts is aimed explicitly against Russia in “demonstrating the credible and flexible ability of our strategic bomber force,” and “saw B-52s complete simultaneous,  round-trip sorties from Minot Air Force Base, North Dakota, and Barksdale Air Force Base, Louisiana, to the Arctic and North Sea regions.”

Then President Obama “said the request, a four-fold increase from last year’s $789 million, would enable the United States to strengthen the US military posture in Europe. NATO Secretary-General Jens Stoltenberg called the move a ‘clear sign’ of the US commitment to European security.”

America and its ardently anti-Russian NATO adherents cannot believe — refuse to believe — that Russia has no interest whatever in threatening “European security.”  The US-NATO attitude is ludicrous.  Russia wants to trade with Europe. It wants mutual prosperity.  Russia wants to flourish and thrive, economically and socially.  Its government knows that it can’t achieve this objective for its people if it doesn’t have full, open, mutually beneficial trade with surrounding countries and with all of Europe.

It would be madness for Russia to indulge in military confrontation with its Baltic neighbours, who are important trading partners.  Their economies are bound up with that of Russia, and it makes sense for them — and for Russia — to boost cordial relations.

Russia certainly wanted Crimea to return to Russia — just as almost all Crimean citizens wanted to do.  It is sensible for the territory to remain part of Russia (as it had been for over 150 years) because the vast majority of the inhabitants of Crimea are Russian-speaking,  Russian-cultured and  Russian-educated, and voted (in the opening words of America’s Declaration of Independence) to “dissolve the political bands which have connected them with another” in order to rejoin Russia.  It would be strange if they did not desire accession to a country that not only welcomes their kinship, empathy and loyalty but is economically benevolent concerning their future, unlike Ukraine’s terminally corrupt regime.

In June 2014 President Obama declared that “we will not accept Russia’s occupation of Crimea” but has not said what he intends to do to reverse the popular accession of the Crimean people to Russia.  Does he for one moment imagine that his much-publicized goal of “a Europe that is whole and free and at peace” would be attainable if Crimea were to be wrenched from Russia and handed to Ukraine?  Does he seriously think that if Ukraine took over Crimea there would be any possibility that its inhabitants could, in the words of his own nation’s Declaration of Independence,  enjoy “Life, Liberty and the pursuit of Happiness”? Has Obama thought about what would happen if two million Crimean people, who have made it clear that they do not want to be ruled by Ukraine, were suddenly ordered to accept domination by Ukraine’s corrupt oligarchs?  And who could give such an order?

But Mr Obama’s posturing hardly matters.  Crimea is only an expedient for the war drums to be pounded and for the forces of US-NATO to be given even higher priority in their belligerently confrontational stance against Russia.  Not least,  it is welcome news for the big spenders on military equipment in Washington where members of the Economic Club will be rejoicing in their wealth and ever-increasing profits.  But they and the other warmongers had better be careful : what goes around, comes around.

Brian Cloughley writes about foreign policy and military affairs. He lives in Voutenay sur Cure, France.

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