Permanent War Economy

The concept of permanent war economy originated in 1944 with an article by Ed Sard (alias Frank Demby), Walter S. Oakes and T.N. Vance, a Third Camp Socialist, who predicted a post-war arms race. He argued at the time that the USA would retain the character of a war economy; even in peacetime, US military expenditure would remain large, reducing the percentage of unemployed compared to the 1930s. He extended this analysis in 1950 and 1951.

The CEO of General Electric and vice-chairman of the War Production Board, Charles Edward Wilson ("Electric Charlie," not to be confused with "Engine Charlie," Charles Erwin Wilson of General Motors) had already argued for the continuation of large scale military spending in a speech at the Twenty-Fifth Anniversary Dinner of the Army Ordnance Association on January 19, 1944. Although he did not use the term "Permanent War Economy" he did argue for an institutionalized war economy—i.e. a semi-command economy to be directed by corporation executives, based on military industry, and funded by government. Wilson argued for this system for purely military reasons. He did not make any argument for a "military Keynesianism". The term refers to the economic component within the military-industrial complex (MIC) (aka. "the Iron Triangle") whereby the collusion between militarism and war profiteering are manifest as a permanently subsidised industry. Wilson warned at the close of World War II that the US must not return to a civilian economy, but must keep to a "permanent war economy."