The Impact of Military Spending on Profit Rate in the US, 1870-2015

Abstract

Marxist scholars examine the complex relationship between military spending and the profit rate in terms of capital productivity, the organic composition of capital, and broader class dynamics. Empirical studies grounded in this theoretical framework suggest that the impact of military expenditures on profit rates varies depending on a country's role in the arms trade and the historical period analyzed. This study focuses on the United States, the largest military spender and arms exporter. Using various cointegration methods and data covering nearly a century and a half, the analysis suggests that while military expenditures generally support profit rates, their effect becomes negative during the neoliberal era, likely due to structural shifts toward financialization.