In macroeconomics, the guns versus butter model is an example of a simple production possibility frontier. It demonstrates the relationship between a nation's investment in defense and civilian goods. In this example, a nation has to choose between two options when spending its finite resources. It can buy either guns (invest in defense/military) or butter (invest in production of goods), or a combination of both. This can be seen as an analogy for choices between defense and civilian spending in more complex economies.
The "guns or butter" model is generally used as a simplification of national spending as a part of GDP. The nation will have to decide which balance of guns versus butter best fulfill its needs, with its choice being partly influenced by the military spending and military stance of potential opponents. Researchers in political economy have viewed the trade-off between military and consumer spending as a useful predictor of election success.[1]
This model does not typically correlate well with free market economies.[2]
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One theory on the origin of the concept comes from William Jennings Bryan's resignation as secretary of state in the Wilson Administration. At the outbreak of World War I, the leading global exporter of nitrates for gunpowder was Chile. Chile had maintained neutrality during the war and provided nearly all the USA's nitrate requirements, as it was also the principal ingredient of chemical fertilizer in farming. The export product was sodium nitrate, a salt mined in northern Chile.
With substantial popular opinion running against U.S. entry into the war, the Bryan resignation and peace campaign (joined prominently with Henry Ford's efforts) became a banner for local against national interests. Bryan was no more pro-German than Wilson; his motivation was to expose and publicize what he considered to be an unconscionable public policy.
The National Defense Act of 1916 directed the President to select a site for the artificial production of nitrates. It was not until September 1917, several months after the USA entered the war, that Wilson selected Muscle Shoals, Alabama, after more than a year of competition among political rivals. A deadlock in Congress was broken when Senator Ellison D. Smith from South Carolina sponsored the National Defense Act of 1916 that directed "the Secretary of Agriculture to manufacture nitrates for fertilizers in peace and munitions in war at water power sites designated by the President". This was presented by the news media as "guns and butter".
Perhaps the best known actual usage (in translation) was in Nazi Germany. In a speech on January 17, 1936, Minister of Propaganda Joseph Goebbels stated: "We can do without butter, but, despite all our love of peace, not without arms. One cannot shoot with butter, but with guns." Sometime in the summer of the same year, Hermann Göring announced in a speech, "Guns will make us powerful; butter will only make us fat."[3]
Another use of the term was Margaret Thatcher's reference in a speech that, "The Soviets put guns over butter, but we put almost everything over guns."[4]
This metaphor served as the title for an episode in season 4 of the hit TV show "The West Wing" (1999–2006) that focused on the portion of the federal budget devoted to foreign aid.
The song "Guns Before Butter" by Gang of Four from their 1979 album Entertainment! is about this concept.
In the movie "Baby Boy" starring Tyrese Gibson & Snoop Dogg, The Character Melvin brakes down the differences of guns and butter to Jody and Sweetpea
United States President Lyndon B. Johnson's Great Society programs in the 1960s is an example of the guns versus butter model. While Johnson wanted to continue New Deal Liberalism, he was also in the arms race of the Cold War, and Vietnam War. These put strains on the economy, and hampered his Great Society programs.