UNCOMMON SENSE 8 © October 1995

By Seymour Melman, Professor Emeritus of Industrial Engineering, Columbia University, Chairman of the National Commission for Economic Conversion and Disarmament, and Advisory Board, National Jobs for All Coalition.

Though the late Seymour Melman wrote this piece some time ago, his view that our expansive military budget has had malign effects on our industrial base, including the neglect of infrastructure, is unfortunately more pertinent than ever. See also his later piece. [Ed.]

The end of the Cold War gives the United States an unprecedented opportunity to build a new foundation for international security and to redirect billions of defense dollars to neglected domestic needs. This “peace dividend” could contribute to the goal of JOBS FOR ALL in a vigorous peacetime economy.

The powerful military-industrial complex spawned by nearly a half century of Cold War has convinced Congress to maintain military forces with “the ability, in concert with regional allies, to win two nearly simultaneous major regional conflicts.” Thus, despite a budgetary deficit that is used to justify cuts in domestic spending, our government holds onto levels of military spending comparable to average Cold War years and in excess of “the combined spending ot the world’s next 10 largest military establishments.”[1] President Clinton, moving away from his original commitment to craft a defense budget scaled to the reduced military threat, has proposed instead to increase weapons procurement by almost 50 percent over 1996 levels by the year 2001. Because millions of jobs, the economic health of whole communities, and entire sectors of our economy have come to depend on military spending, the power of the military-industrial complex persists in the post-Cold War era.

It is not too late to “do the right thing.” First, we need to understand how the Cold War and massive military spending have undermined our civilian economy. Second, we must recognize how Economic Conversion can revitalize our productive capacity. Only then will we get behind the drive for economic conversion that can give us disarmament, good jobs, and a higher standard of living.

The Cold War and U.S. Economic Decay

The Cold War has bled our civilian economy by preempting capital resources, taking the lion’s share of top scientific talent as well as federal research and development (R & D) funds, and appropriating government funds that would otherwise have been available for the development of our infrastructure.

Preempting capital resources: Between 1947 and 1991, the military enterprise used $8.7 trillion of U.S. resources (1982 dollars), more than the money value of the nation’s entire stock of civilian industrial plant, equipment, and infrastructure. Since 1952, the annual American military budget has been greater than the after-tax profits of all U.S. corporations. High levels of military procurement for nearly 50 years have created widespread dependency on weapon systems production among key manufacturing sectors. The wasteful production practices encouraged by cost-plus military contracts are the very antithesis of what was long a strength of U.S. industry, namely using well-paid, highly skilled workers to produce innovative products and to develop new production technologies to offset rising wages.

The easy, high profits of military manufacturing (along with an often overvalued dollar and tax incentives for companies that transfer their operations overseas) encouraged U.S. manufacturers to abandon civilian markets. Since attractive imported goods keep our shops well stocked, the effect of sacrificing investment in the U.S. civilian economy in favor of the military economy escapes attention. Yet for manufacturing as a whole, as an example, imports represented 2.7 million jobs in 1990. In attributing the causes for the much-noted loss of good, civilian jobs in manufacturing, we often fail to count the Cold War economy.

While the United States was squandering its resources on the Cold War and becoming a military economy, many of its allies were making the domestic investments that would lead to superior productivity and competitive strength. For example, in 1988, the United States put $50 into the military for every $100 of new civilian assets. But our chief economic rivals, Germany and Japan, invested $18 and $4, respectively. Of the total military spending by the U.S. and its allies, 55 percent is paid for by the American taxpayer, and only 45 percent is spent by all other members of NATO, plus Australia, Japan, and South Korea. The total population of these 18 countries is more than double that of the United States, and their combined output is 60 percent greater.[2]

R&D takeover: During nearly 50 years of Cold War, the federal government became the single largest funder of R&D in the U.S. economy. By the late 1980s two-thirds of federal R&D spending was utilized by the Department of Defense, primarily for its applied industrial research on weaponry and allied equipment. Germany and Japan spend a larger fraction of output for nonmilitary R & D than does the United States, and Japan probably spends a greater absolute amount as well.[3]

Infrastructure neglect: The massive preemption of capital for the military has had the further effect of depleting the whole infrastructure of the society, especially during the Reagan era. Military spending currently consumes almost half of the federal budget available for “discretionary spending.”[4] The decay of housing, schools, streets, parks, drinking water, medical facilities, bridges, highways, and railroads has restricted the growth of productivity. There can be no enduring industrial excellence in a sea of infrastructure depletion. Here, too, our allies were building their civilian economies while we shouldered the Cold War. Japan, for example, invested in its infrastructure at 20 times the rate of the United States in recent years and as a consequence of this and a higher rate of investment in productive capital, achieved six times the U.S. rate of productivity growth. Such investment in infrastructure has been shown to be a powerful influence on economic growth.[5]

Economic Conversion: the Key to Disarmament and Jobs

The key to breaking the military stranglehold on our economy is a comprehensive program of economic conversion that emphasizes planning for alternative production before cuts and layoffs occur. Replacing the economic stimulus of military spending also requires investment to open up alternative markets for defense contractors and civilian firms and promote sustainable economic growth.

A vigorous nationwide effort for demilitarization and economic conversion would create a net increase in civilian jobs providing that cuts in military expenditures were transferred to the civilian economy. The estimated annual shortfall in outlays for all aspects of U.S. infrastructure amounts to about $165 billion. If $165 billion were transferred from the military to education, transportation, environment, housing, health care, civilian R&D, etc., 3.95 million (direct and indirect) military-based jobs would disappear. But 5.11 million new civilian-based jobs would be created–for a net gain of 750,000 new jobs. If an additional annual $80 billion, raised by restoring 1980 tax levels on the super rich, were spent on conversion, an additional 2.5 million jobs could be created.

Essentials of conversion: Economic conversion has three essential components. It must be ordered by law, planned, and undertaken locally in each defense factory, laboratory, and military base.

The cornerstone of the comprehensive conversion law proposed in Congress by the late Ted Weiss (D-NY) is this provision: “There shall be established at every defense facility employing at least 100 persons an Alternative Use Committee composed of not less than eight members with equal representation of the facility’s management and labor.” This composition gives weight to members whose self-interest is tied to long-term production competence rather than short-term financial maneuvers that yield quick profit but degrade the production competence of an industry. To date, Congress has not acted on this comprehensive conversion bill. However, the President could order such local conversion planning by Executive Order.

Planning is necessary because industry must select new products, estimate their market, retrain employees, alter the organization of production, and redesign plant facilities. Military bases are convertible to industrial parks, schools, hospitals, airports, recreational facilities, etc. In military laboratories, the scientific staffs must match their knowledge with society’s technological needs like renewable energy resources and pollution prevention. The firsthand knowledge of defense establishment employees is essential for conversion. Thus, conversion must be done locally; no remote central office can possess the necessary knowledge of people, facilities, and surroundings.

What can converted factories produce? Factories, bases, and research facilities that are converted to civilian work can–for a start–address the long list of consumer and capital goods that have solid markets in the U.S. but are now imported. To be sure, this requires doing as well or better than foreign producers. Converted factories can produce advanced designs of every sort of machinery and consumer goods: machine tools, electric locomotives, farm machinery, oil field equipment, and consumer electronics, to name just some. Modernizing infrastructure will require construction machinery and capital goods of many kinds.

Electrification of U.S. railroads has been proposed as one of the particularly desirable peace dividend projects. This 20-year task, costing over $100 billion, will require construction of entirely new industries for producing and maintaining equipment that is not currently being designed, developed, or produced in the United States.

Change in federal policy: All this requires a marked change in the federal government’s policy–from favoring the war economy to favoring productive, life-serving investments of every sort. Priority in the use of funds freed from military production should be given to initiatives to restore urban communities, meet human needs, such as child-care, and provide ecologically-sound transportation and energy. To acquire the courage to break with their economic dependency on the Pentagon, employees, their communities and Congressional representatives need blueprint-ready conversion plans that define an economic future for their factories, bases, and laboratories. This required rethinking and redirection of government spending should be part of a full-employment agenda of employment creation, retraining, relocation assistance, and income support during the period of transition for all workers who are affected by economic restructuring.

Economic Conversion and the Jobs for All Coalition

Unaware of the job-destroying results of militarism and of the promise of economic conversion, the public may well regard disarmament as adversary rather than ally of full employment. To the contrary, a large peace dividend plan could set in motion a wave of new employment in useful work. Organizations that are leading the drive toward disarmament and economic conversion, like the National Commission for Economic Conversion and Disarmament, the Long Island Alliance for Peaceful Alternatives, and New York Metropolitan Peace Action participated in the founding of the National JOBS FOR ALL Coalition and are a vital component of the struggle for full employment.

NOTES:
1. New York Times, D2, Sept. 14, 1995.

2. Center for Defense Information. (1995). “Threats to American Goals and Interests: When Is Military Response Necessary? The Defense Monitor 24 (4): 1-8.

3. NewYork Times, February 25, 1992.

4. Center for Defense Information, 1995.

5. David Alan Aschauer), Public Investment and Private Sector Growth. Washington, D.C.: Economic Policy Institute, 1990.

REFERENCES:
Collins, Sheila D., Helen Lachs Ginsburg, and Gertrude Schaffner Goldberg (1994). Jobs for All. New York: The Apex Press.

Melman, Seymour (October, 1993). What Else Is There to Do?– Neglected Prospects for Major Job Creation in U.S. Manufacturing. A Report to the National Commission for Economic Conversion and Disarmament. Washington, DC: National Commission for Economic Conversion and Disarmament.

___________.(1992). Rebuilding America: A New Economic Plan for the 1990s. Open Magazine Pamphlet Series #21. Westfield, NJ

__________. (1985). The Permanent War Economy. New York: Simon & Schuster.

Editor: June Zaccone, Economics (Emer.), Hofstra University