Our country is now geared to an arms economy bred in an artificially induced psychosis of war hysteria and an incessant propaganda of fear.

The line condemns a political and economic system that, in MacArthur’s view, had become structurally dependent on perpetual military readiness. It suggests that public consent for high defense spending is maintained less by sober assessment than by cultivated fear—“war hysteria” and “propaganda”—which in turn “gears” the nation’s economy toward armaments. The phrasing implies a feedback loop: fear drives militarization; militarization entrenches an “arms economy”; that economy then benefits from continued fear. Read this way, the quote is an early articulation of concerns later associated with the “military-industrial complex,” warning that democratic priorities can be distorted when security narratives become a tool of mass persuasion.