Like any other living financial organism, the U.S. economy is responding to crises. No.1 task is to find a quick and most efficient way out. According to former U.S. Federal Reserve System (FRS) Chair Mr. Ben Bernanke, Washington developed that kind of strategy a long time ago and has been successfully using it over recent decades. The main theses of that hypothesis were presented in his Brooklyn speech.

Ben Bernanke has made a rather daring statement: only a ‘good’ war can help the U.S. economy overcome negative implications of the ongoing economic crisis.

The former FRS chair called attention of the audience to the role of the defense sector in the U.S. economy. The defense sector’s development should not be seen as a top priority but still as a way of combating recession it has proven to be a most efficient method of dealing with financial problems.

WWII is an obvious proof of this viewpoint. The U.S. economy practically got back on its feet and recovered from protracted depression in the early 1940s thanks to defense contracts. The positive effect was felt long after the hostilities had ended.

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In 2010, the United States chose to reduce its military expenses, which, in the opinion of Bernanke, had a direct negative impact on GDP growth.

Defense budgets of recent years are incomparable to the sums spent on the defense sector in the 1940s and the 1960s but even a slight alternation of their volume influences the current economic conditions, mostly in a negative way. Mr. Bernanke sees military techno­logies which are eventually applied more broadly in other economic sectors as the key positive effect of the defense sector’s development on the national eco­nomy.

This is the starting point of U.S. economic development, primarily in the long-term future. Wars enable the United States to retain its technological leadership, strength and independence as features characteristic of a totally self-sufficient state.

Ben Bernanke has made a rather daring statement: only a ‘good’ war can help the U.S. economy overcome negative implications of the ongoing economic crisis.

What is the meaning of his words? What gives him the right to draw categorical conclusions and how precise are his forecasts?

To say that Mr. Bernanke enjoys authority on the global financial arena is to stay nothing. He was in charge of the FRS for eight years, which made him capable of a profound analysis of the U.S. economy more than anyone else. Acclaimed economists and financiers have every reason to believe that Mr. Bernanke thoroughly studied the effect of the defense sector’s development on the U.S. economy during the years of his work for the government.

The active relocation of industrial productions from the United States to Asia in recent decades is a factor supporting the opinion of Wthe former FRS chair. Thousands of plants and factories were built in the East but neither cheap raw materials nor cheap workforce prompted the United States to move satellite factories or other defense enterprises to China or any other states.

Hence, defense contracts not only have a favorable effect on the U.S. economic status but also, given the circumstances, become practically the only way to set in motion the stalling U.S. economy. Washington has a crying need for big or even huge con­tracts.

It is easy to give an example of the economic effect of defense contracts. Imagine a factory manufacturing popular-brand motorcycles. A new bike is a purchase affordable to an average American which can be used for at least two or three years. Weapons are a completely different story. A cruise missile costs approximately $1 million. As soon as it is attached under a fighter’s wing, its manufacturer receives a new order.

Return on war-time investments in the defense sector can be paramount. Jobs and economic turnover rates will be rocketing, which is very good for GDP growth, a key economic performance indicator of every state.

To a large extent, America has established itself as a great power thanks to the economic growth achieved during WWI and WWII years. The United States was not a very active combatant but it managed to arrange arms deliveries to the Soviet Union, the United Kingdom and even Germany. The war fought in the territory of the contemporary European Union forced many chiefs of state to move their gold reserves to the United States. The enterprising U.S. government put all available means to use, spurring on economic progress.

The Middle East crisis which is likely to linger for several years or even decades has a positive economic influence on the U.S. defense sector. Alongside the provision of defense contracts, these events seriously damage the economies of the European Union, China and other emerging markets in Asia.

The European economy is tailored for close interaction with the U.S. defense sector. The NATO mechanism is structured in a way which prevents any member-state from conducting professional military activity without the support of the United States. As soon as a new armed conflict looms, European leaders will have to procure expensive modern weapons from the United States.

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Many readers may be wondering why Mr. Bernanke allows himself to speak openly about such important or even secret things. Such speeches cannot be accidental, as they will be playing a certain role in the U.S. economic development strategy in the upcoming decades. It is easy to presume that the U.S. defense budget may beat the former annual record of $600 billion pretty soon.

The defense sector’s development is a powerful economic growth incentive not only for the United States. Solutions introduced in military projects play the role of a vital driver for financial stabilization in the Russian Federation as well. The same as the United States, Russia subsequently applies many technologies outside army training ranges and conflict zones. Amid the sanctions, the defense sector development seems to be all but the only factor sustaining the Russian economy.

Alexey Fedorovich