CNN.com is reporting that Boeing has been awarded a $3.5 billion Pentagon contract, which ultimately may be worth $35 billion, to build Air Force tankers.
An injection of capital like this in government spending creates large ripple effects for more job creation in the economy.
Here is how it works; when Boeing has been awarded this contract, the demand for parts to build these tankers goes up, meaning that Boeing will order parts from different companies in the country and overseas who make the parts Boeing needs to build these tankers.
Each time, when Boeing orders parts from different companies, it creates ripple effects of employers increasing their production, hence hiring perhaps more workers. And this also happens in foreign economies wherever Boeing orders parts.
As workers earn their salaries, they have more money to spend in local retail stores, again, retail stores will see an increase in consumer spending, hence they will order more supplies. As they order supplies from its suppliers, the demand for goods increases, enabling suppliers to retail stores to hire more workers, and order more supplies from their suppliers.
In the end, you have powerful activities in the economy. And that’s how the government creates employment opportunities by spending in a local economy.
In Namibia, when the Namibia Defense Force orders the Indian-made helicopters, spending about N$74 million per each helicopter, it helps to create employment opportunities in India; same concept as Boeing above.
For the government to help create employment opportunities, it is a good thing to spend in the local economy.