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Although economic considerations have a rolein grand strategy, economic goals per se are inap-propriate as national security objectives.Nonetheless, specific economic goals havebecome part of America’s national security strate-gy (as well as part of the national psyche)—in largepart as a result of the 1973 OPEC (Organizationof Petroleum Exporting Countries) oil embargoand the economic trauma of that decade. Andthere is constant pressure to add further econom-ic objectives to that strategy.Considerations of practicality, morality, andefficiency, however, argue that economic goalsshould not be regarded as national securityresponsibilities. The economic trauma of the1970s was more a result of foolish American eco-nomic policy than of the capabilities of oil- pro-ducing nations to do damage. Even at that time,self-inflicted wounds far exceeded those exter-nally imposed. Today, U.S. susceptibility to suchexternal pressure is minimal. In short, there is noneed to use America’s military resources todefend the U.S. economy.Moreover, it is difficult to delineate “strate-gic” goods or economic threats in a practicalfashion, and such difficulty will only compoundover time. Perhaps more important, the willing-ness to use military force to ensure access toresources or to obtain economic objectives raisesa significant moral question. When nations haveacted in this fashion, the United States and othercountries have considered it immoral. Yet, in ourfear of resource deprivation, we have fashioned astrategy that countenances such actions.Finally, the addition of economic goals tonational security objectives complicates the mak-ing and implementation of national securitystrategy and diverts a significant portion of mili-tary resources away from more appropriate, corenational security ends.
Economic Security 
A National Security Folly? 
by Donald Losman
 _____________________________________________________________________________________________________
Donald Losman isa professor of economicsat the Industrial College of the Armed Forces, National Defense University, Washington, D.C. The viewsexpressed are the author’sand do not represent the viewsof the National Defense University or the Department of Defense.
Executive Summary
No. 409August 1, 2001
 
Economics and NationalSecurity:An Unfortunate Blend
Economic security issues have traditional-ly centered on health uncertainties, retire-ment needs, and protection against incomeinterruption. In an interesting twist, over thepast quarter of a century our civilian leader-ship and the military community, joined by avariety of domestic groups, have transformedthe concept of
economic 
security into a promi-nent
national 
security issue. Undoubtedly, themajor impetus for this was the 1973 OPEC(Organization of Petroleum ExportingCountries) oil embargo and the economictrauma of the 1970s. In those dark days of oilshortages, record interest rates, and rapa-cious inflation, foreign economic “weapons”appeared to threaten the economic well-being of the United States and possibly even jeopardize important strategic interests. InU.S. debates on national security, economicconcepts and references began to abound.Reflecting this blending of economics andnational security, public opinion pollstersbegan to ask Americans what their percep-tions were of the gravest national securitythreats, usually posing economic challenges(such as those from Japan) as one choice andmilitary threats (from the Soviet Union orNorth Korea, for example) as another.Nevertheless, even as late as 1987 and1988, formal U.S. documents on nationalsecurity strategy remained narrowly focusedon military power and the U.S. rivalry withthe Soviet Union. But the documents beganto broaden, particularly in the administra-tions of George H. Bush and William J.Clinton. Those administrations emphasizedthe role of economics and entertained theinclusion of environmental policy. For exam-ple, the first page of the introduction to
ANational Security Strategy for a New Century,
published in December 1999, has the word“economy” or “economic” five times, and“prosperity” appears twice. Listed under vitalnational interests is the “economic well-being of our society.”
1
The paragraph con-cludes, “We will do what we must to defendthese interests . . . using our military mightunilaterally and decisively,”
2
if necessary.Those statements indicate that America iswilling to use military force to attain eco-nomic goals. Contrast that text with the 1988report’s introduction, in which the word“prosperity” never appears, and “economic”is used only three times, mainly as a tool toachieve larger ends rather than as an end initself.
3
Naturally, America’s military estab-lishment has “gotten the word” on economicgoals as national security objectives.Rarely, however, has the economic contentof national security policy been put to a rigor-ous intellectual or logical test. Instead, it hassimply been accepted. But the economic secu-rity concept as a national security goal is ill-suited, imprecise, and unnecessarily costly andcould entail using U.S. military might in dubi-ous ventures. Moreover, attaining economicobjectives through the use (or the threateneduse) of military force is essentially a “mightmakes right” philosophy. At best it is morallyquestionable; at worst it is abhorrent. Andoperationally the concept causes problemsthat complicate and degrade our appropriatenational security missions.
Traditional EconomicSecurity
Human beings tend to be averse to risk,and economic insecurity has traditionallybeen addressed by economic measures.Insurance plans, personal savings, homeownership, and the like are common privatemethods of dealing with the economic inse-curities of old age. Security against lossesfrom theft, fire, and other kinds of risks isprovided by insurance and preventive mea-sures such as alarm systems and fire extin-guishers. Long-term health care policies areavailable to reduce and stabilize the costs ofcaring for the elderly. Economic security hasalso been addressed, rightly or wrongly,through such government programs as
2
Over the pastquarter of a cen-tury our civilianleadership andthe military com-munity . . . havetransformed theconcept of eco-nomic securityinto a prominentnational securityissue.
 
Social Security, Medicare, unemploymentcompensation, welfare, and trade protection.In short, we have traditionally used private orpublic economic measures, not the military,as the main provider of economic security.
Oil Paranoia
A specter is haunting America—the con-tinuing, and at times almost hysterical, fearof oil shocks. In October 1973, the Arab oil-producing states imposed productionrestraints and an embargo—their secondsuch attempt. They did so allegedly as a pun-ishment for those countries that supportedIsrael in the Middle East war earlier thatmonth. Their first effort at embargooccurred in 1967, following the lightningIsraeli victory in the June Six-Day War. Thatepisode is not well-known because it was atotal failure. However, global oil market con-ditions would change substantially in subse-quent years.Oil in the United States had been gov-erned by a maze of state and federal regula-tions. As a subsidy to domestic oil producers,nominal U.S. prices were held relatively sta-ble—and higher than world prices—from the1950s through 1973. It was not until 1974,after the second OPEC embargo, that infla-tion-adjusted (real) U.S. prices were keptbelow world levels. Nonetheless, even before1974 domestic price signals were misleadingand promoted vulnerability to price and sup-ply disruptions. For example, between 1970and 1971 inflation-adjusted domestic crudeoil prices declined 1.2 percent, despite realworld prices rising more than 21.2 percent.From 1971 to 1972 real U.S. prices againdeclined (3.4 percent) in the face of anotherincrease (7.9 percent) on world markets,
4
thereby giving American consumers andbusinesses the illusion of greater availabilityof oil when just the opposite was occurring.Internationally, by 1970 excess producingcapacity outside the OPEC countries had vir-tually disappeared, just as production hadpeaked in the United States and Canada. AndLibya’s successful negotiations in 1970 withmajor oil companies marked the beginningof a significant shift in power between theinternational oil companies and the MiddleEast oil-producing states, with the latterenhancing their bargaining positions sub-stantially.Accordingly, economic developmentaround the world, coupled with U.S. govern-ment–manipulated domestic oil pricing,brought a serious vulnerability to energy-importing states in general and to the UnitedStates in particular. The United States built asociety that resided far from work, drove gas-guzzling automobiles, and lived in energy-inefficient homes. The oil shock of 1973 wasextremely disruptive and raised energy andrelated prices in a U.S. economy that hadalready been steadily inflating since the mid-1960s. In August 1971, more than two yearsbefore the oil shock, President Richard M.Nixon had invoked price controls to containinflation. Although the Netherlands and theUnited States were the two targets of theembargo, the entire world was hit withsharply higher oil costs as a result of the 1973oil crisis.The link between imprudent U.S. eco-nomic policies and the subsequent politicaland economic crisis cannot be overstated.Indeed, “an ‘energy crisis’ was developing . . .long before the October 1973 war.”
5
In 1971,in Teheran, the OPEC producers negotiated afive-year agreement with the oil companiesfor higher prices. But in the face of swollendemand, the “Teheran Agreement was abro-gated before the ink dried.”
6
Althoughnumerous reasons for the tight market for oilexisted, “the most important, by far, was therapidly growing U.S. demand.”
7
By 1972 U.S.consumption was already pushing worlddemand beyond planned production, refin-ing, and transport capacities. By late springof 1973 oil company executives were warningof a coming crisis, but “the American govern-ment seemed to discount the seriousness ofthe threat.”
8
By the summer OPEC was call-ing for a conference to again amend the five-year agreement.
3
We have tradi-tionally used pri-vate or publiceconomic mea-sures, not the mil-itary, as the mainprovider of eco-nomic security.
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