The origins and evolution of military Keynesianism in the United States

James M. Cypher

Journal of Post Keynesian Economics, 2015, vol. 38, issue 3, 449-476

Abstract: From after World War II until late 1971, the U.S. economy demonstrated new capacities in terms of macroeconomic stability during the so-called Golden Age: recessions were brief and shallow while growth was strong, generating shared returns for the working class, a burgeoning middle class, as well as for capital-owners. Neither then nor up to now has there been sufficient recognition of the key role played by military expenditures in this dynamic process. These enormous outlays at times accounted for as much as 25 percent of gross domestic product—including their induced multiplier effects. This article examines the origins of what has been termed “military Keynesianism” during the Golden Age, emphasizing the little-known leading role played by Leon Keyserling. Keyserling exercised behind-the-scenes power in order to convert Keynesian theory into a macroeconomic policy that would be both consistent with the U.S. institutional context and sufficiently large to promote long-term conditions for full employment. With a degree of audacity, at a historically opportune moment given the socioeconomic resonance of the foundational document known as “NSC-68” promulgated by the “state within the state”—the National Security State—Keyserling successfully challenged the fallacious neoclassical “law” of guns or butter.

Date: 2015
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DOI: 10.1080/01603477.2015.1076704

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