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Terence Corcoran: Mark Carney’s new military-industrial complex

Ottawa appears to have been gripped by ‘military Keynesianism’

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In his farewell address as president of the United States in 1961, Dwight D. Eisenhower, who as an American general oversaw the Allied liberation of France and Germany to end the Second World War, delivered a post-war warning to his people.

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“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists, and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defence with our peaceful methods and goals so that security and liberty may prosper together.”

Who would have imagined that 65 years later Canada — dedicated to peace, order and good government — would begin creating its own version of the military-industrial complex. Liberal Prime Minister Mark Carney now sees the military as the foundation of a “Defence Industrial Strategy” that will help propel the Canadian economy.

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The PMO said Ottawa’s new defence strategy involves big spending that will allow Canadian industry to take advantage of $180 billion in defence procurement opportunities and $290 billion in related capital investment opportunities over the next 10 years.

The new Canadian defence strategy — let’s call it what it is, a military-industrial complex (MIC) — will, according to Carney, deliver $125 billion in downstream economic benefit by 2035 and create 125,000 high-paying careers, increase our defence exports by 50 per cent, raise the share of defence acquisitions awarded to Canadian firms to 70 per cent, and grow Canadian defence industry revenues by 240 per cent.

What Carney is really creating, economically, is another centrally-planned industrial strategy filled with risk in the belief that big state spending and borrowing on the military creates broader growth across the economy.

The theory is known as “military Keynesianism,” based on the ideas of early-20th-century economist John Maynard Keynes, who advocated the use of government spending, including  via deficits, to boost the economy. Whether Keynes would see the MIC system as a generator of jobs and growth is doubtful.

Robert Skidelsky, author of a three-volume biography of Keynes, last year wrote that “Keynes himself would have been depressed” by the existence of military Keynesianism, “but not surprised by the ease with which war fervour can be stoked up to justify Keynesian policies.”

The very idea that defence spending boosts jobs and welfare across the economy is constantly under attack from economists in leftist and libertarian camps. Analysts at Jacobin, which describes itself as a leading voice of the American left, says the U.S military-industrial complex has never been worse. Libertarian free market think-tanks — the U.S. Mises and CATO institutes — see the MIC as a cause of rising government debt and semi-corrupt practices with no real increase in economic growth.

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Here in Canada, the economic benefits of Carney’s national defence strategy are also questioned by more middle-of-the-road commentators. When the PM announced an $81-billion increase in defence spending in his 2025 Canada Strong budget to help boost the economy, an RBC Wealth Management commentary warned that while there may be short-term benefits from military spending, “it gets trickier” over the long term. The negative aspects of defence spending include possible “capital leakage, fiscal overspending, and the risk of diverting resources from more productive sectors of the economy.”

To prevent such long-term leakage and diversion of government funds away from infrastructure, education, housing, immigration, policing, health care and other economic sectors, the RBC report notes that “without a procurement framework that prioritizes domestic suppliers, increased defence spending could result in capital outflows.” The RBC report did not explain how a centrally-planned “procurement framework” would operate.

These are the risks created by the economic model Carney is attempting to impose on the Canadian economy. As argued in FP Comment last week, central government planning and control has been a formula for failure. It is one thing for the government to control defence spending and strategies when the objective is to run the system efficiently, including acquiring the best services and equipment at the most competitive prices, no matter where they come from. Attempting to run the system with a view to maximizing local purchasing creates incentives for making the wrong decisions.

To allegedly solve the spending and capital diversion problem, Carney’s new Defence Industrial Strategy involves setting up a major new central planning operation. In a 13,000-word strategy outline, the government says the plan ”has been informed by one of the most comprehensive engagement efforts ever undertaken in Canada’s defence and industrial policy space with over 1,000 touch-points across industry, government, academia, and provincial and territorial partners.”

No doubt thousands more touch-points will have to be established as the government attempts to rationalize its way through hundreds of billions of dollars in new spending on trucks and drones from Canadian manufacturers even if they could be imported at less cost and better quality.

Canadian industry is already gearing up for a piece of the action, including Algoma Steel, a legendary Ontario industrial basket case. An Algoma official praised the Carney plan as a strategy that “aligns the plan for Canada’s military capacity with a domestic industrial policy — putting more weight on the buy-Canadian approach and opening the door for opportunities for companies like ours.”

Complicating the situation is that Canada may have to break its long-standing relationships with U.S. industries, both as a purchaser and seller. A list of corporations and agencies that are part of the existing U.S. military-industrial complex includes an outfit called the Canadian Commercial Corporation (CCC), which turns out to be a government of Canada operation that describes itself as “the U.S. Department of Defense designated contracting authority for acquisitions from Canada.” The organization is funded by Ottawa “as Canada’s foreign military sales agency.”  Looks like the CCC may have to reposition its mandate.

Otherwise, what is the future for this agency set up to sell Canada to the U.S. with Ottawa’s help? And what is the future for scores of Canadian companies that are likely to be at some risk of losing their roles as suppliers to U.S. military operations? Hard to tell, since Carney appears to be chasing many strategies simultaneously. Just as he announced his buy-Canadian military plan to diversify away from America’s MIC, he said he is still involved in talks with the U.S. to participate in Donald Trump’s Golden Dome. The talks are “going well,” the prime minister said.

Exactly what is Carney thinking and where is he taking Canada? U.K. economist Robert Skidelsky asked the same question last week in new commentary titled “On Mark Carney and the Fate of Liberal Economies.” In a review of Carney’s now-famous speech at Davos calling for a new world order, Skidelsky surveyed the options.

Ultimately, said Skidelsky, the question is philosophical. “It is about the necessary conditions of a free economy and society. (Friedrich) Hayek believed that a competitive market produced its own order — the spontaneous order — with a minimal state needed to maintain the rules of the road. Keynes believed the spontaneous order would collapse without a central stabilizing force. On this matter, we await Carney’s further thoughts.”

Carney’s promised military complex and other aspects of his Canadian economic agenda suggest we do not need to wait any longer.

Nota Bene: Every warship is a theft from the poor

From a speech by U.S. President Dwight D. Eisenhower, a Republican, in April 1953, shortly after his election, to the American Society of Newspaper Editors. 

Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its labourers, the genius of its scientists, the hopes of its children.

The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some 50 miles of concrete highway. We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people.

This … is the best way of life to be found on the road the world has been taking. This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron.

These plain and cruel truths define the peril and point the hope that come with this spring of 1953. This is one of those times in the affairs of nations when the gravest choices must be made, if there is to be a turning toward a just and lasting peace. It is a moment that calls upon the governments of the world to speak their intentions with simplicity and with honesty. It calls upon them to answer the question that stirs the hearts of all sane men: is there no other way the world may live?

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