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CounterPunch
March 15,
2003
They
Are All Implicated
In
the Grip of a Permanent War Economy
by SEYMOUR MELMAN
Now, at the start of the twenty-first century,
every major aspect of American life is being shaped by our Permanent
War Economy.
Civilian manufacturing industries are
being swept away as a war-focused White House and a compliant
Congress sponsor deindustrialization of the U.S. (1) They favor
production--in Mexico and China, where government powers bar
independent unions. As production of both consumer goods and
capital goods is moved out of America, unions and whole communities
are decimated. Ghost towns are created across the country. That
process is far along in industries that once invented machine
tools, radios, and even TV's. Now the decay proceeds in "new
economy" industries like computers and "Palm"
type devices. The U.S. firms that sell such equipment typically
assemble components that are manufactured elsewhere.
Capital goods have special importance
in all this, for those are the tools and machines used to produce
everything else. Jon Rynn has calculated that by 2004, 50% of
all the production equipment required in the United States will
have to be imported, mainly from Germany and Japan. (2)
Meanwhile, government financing is lavished
without stint to promote every kind of war industry, and foreign
investing by U.S. firms. The war priorities have depleted medical
and education staffs. U.S. medical  planning now includes programs to recruit
large numbers of nurses from India. (3) Shortages of housing
have caused a swelling of the homeless population in every major
city. State and city governments across the country have become
trained to bend to the needs of the military--giving automatic
approvals to its spending without limit. The same officials cannot
find money for affordable housing.
The Permanent War Economy of the United
States has endured since the end of World War II in 1945. Since
then the U.S. has been at war--somewhere--every year, in Korea,
Nicaragua, Vietnam, the Balkans, Afghanistan--all this to the
accompaniment of shorter military forays in Africa, Chile, Grenada,
Panama.
So it should come as no surprise that
there is no public "space" for dialogue on how to improve
the quality of our lives. Such topics are subordinate to "how
to make war". Congress under both Republican and Democratic
control has voted the same war priorities into the federal budget.
Bob Herbert, the New York Times columnist,
reports on 5.5 million young Americans age 16 to 24--without
work in 2003--undereducated, disconnected from society's mainstream,
restless and unhappy, frustrated, angry, and sad. (4) This population,
5.5 million and growing, is the product of America's national
politics that has stripped away as too costly the very things
that might rescue this abandoned generation and train it for
productive work. But that sort of thing is now treated as too
costly. So this abandoned generation is now left to perform as
fodder for well-budgeted police SWAT teams.
The mayor of New York City presides over
a New York Transit Authority that is now in the midst of spending
$3 to 4 billion on subway cars. If this manufacturing work were
done in the U.S.--rather than by Kawasaki in Japan and Bombardier
in Canada--it would generate, directly and indirectly, about
32,000 jobs. (5)
But nothing was heard from the city government
when, after announcing a request for bids for the $3 billion
plus contracts, not one U.S.-based firm offered a bid.
The production facilities and labor force
that could deliver 6 new subway cars each week could produce
300 cars per year, and thereby provide new replacement cars for
the New York Subway system in a twenty year cycle--for the 6,000
railcar fleet of the New York subway system. Such a production
plan would also replace traditional rebuilding of railcars that
has occupied maintenance shops of the New York Transit Authority.
Well-trained engineers are required to
design the key subway transportation equipment. Therefore we
must note that it is almost 25 years since the last book was
published in the United States on these topics: Urban Public
Transportation by Vukan Vuchic (Prentice Hall, 1981). What is
true for the rail equipment industries is also true for every
one of the industries targeted for deindustrialization during
the second half of the twentieth century and early twenty-first
century.
Do you suspect I am exaggerating this
portrait of gloom and doom? See for yourself. Go to the stores
that now sell great arrays of "high tech" merchandise.
Pay attention to the boxes for these goods, which typically state
where the contents are made. Try the largest libraries and see
if you can find texts that contain instruction for production
of the products that have been disappeared from U.S. manufacturing.
At this writing there is a lack of schools,
teachers, and books dealing with rail transportation. Suitable
textbooks will have to be translated from French, German or Japanese.
In the United States, the traditional depositories of knowledge
for these subjects have been wiped out. There are no workplaces
that prospective workers can visit to become acquainted with
the shape of a productive career devoted to making things, all
of which are now imported.
We can learn something from the experience
of the General Electric Company, in particular from the autobiography
of Jack Welch.6 He hailed the profits brought to GE by locating
their largest R&D labs in India. From a careful biography
of Jack Welch's stewardship of General Electric we learn that
"GE has either closed or sold 98 plants in the United States
during the Welch era, 43% of the 228 it operated in 1980."
(7) More recently we learn from Business Week8 that General
Electric will have 20,000 workers in India alone by the year's
end, and is moving towards a "big China R&D center."
The type of work which is being moved by GE to the India and
China facilities includes finance, information technology support,
R&D for medical, lighting, and aircraft. Business Week reports,
"for companies adept at managing a global workforce, the
benefits can be huge.... Now, American Express, Dell Computer,
Eastman Kodak, and other companies can offer round the clock
customer care while keeping costs in check." For an array
of major U.S. firms reviewed by Business Week, the trend of U.S.
jobs being moved offshore is "a trend that's likely to grow."
Here is the Business Week forecast for 2005. (9)
Life Sciences: 3,700
Legal: 14,000
Art, Design: 6,000
Management: 37,000
Business Operations: 61,000
Computer: 109,000
Architecture: 32,000
Sales: 29,000
Office Support: 295,000
Total: 588,000
By 2015, the number of white-collar jobs
of U.S. firms slated for "moving offshore" is expected
to be 3,300,000.
While the cost of labor has been regarded
as a central issue in labor-intensive manufacturing operations,
the picture is rather different with respect to the production
and utilization of capital goods. On January 1, 2003, the New
York Times reported, "China has awarded a potentially lucrative
contract to lengthen the world's first commercial magnetic-levitation
rail system to cities surrounding Shanghai." All this after
the prime ministers of Germany and China took a test ride on
the new high-speed train, which is propelled by magnets. The
Times reported that "the train reached its designated maximum
speed of 266 miles per hour over the nineteen miles between Shanghai
financial district and its main international airport."
The German firms that designed and produced the new Maglev train
were Siemens and ThyssenKrupp. New Maglev trains covering 180
miles and costing more than $5 billion are being negotiated.
The critical point here is that China, a country with one of
the lowest wage rates in the world for industrial production
work, is buying new railroad equipment from German firms which
pay the highest production worker wage in the world. The full
meaning of this situation has not registered in the United States.
But the fact remains that high quality capital goods, backed
by strong R&D, justify their higher prices.
There is no doubt about the main effects
of a Permanent War Economy on the present and prospective production
of consumer and capital goods in the United States. Myths, like
a hoped-for inherent superiority for American-made goods, are
simply melting away--daily. For the colossal $379 billion military
budget now being organized in the United States will include
funding new military bases around the world and the manufacture
of a host of weapons of astonishing complexity and costliness.
All these take up the available "economic space." Thus
the newest major aircraft program--the Joint Strike Fighter--is
expected to cost as much as $750 billion,10, a historically unmatched
price. The new nuclear attack submarines, each longer than a
football field, are now priced at $2.4 billion each.11 Look at
the maps published in our newspapers of new foreign military
bases built for American forces--each of them magnificently equipped
for an unstated but long duration.
Anticipated costs of a U.S. war in Iraq
reach a level of $682 billion. (12)This exceeds the combined
cost for replacing severely damaged housing ($369 billion) and
for electrifying the U.S. main line railroads ($250 billion).13
The next Pentagon budget for 2004 promises to checkmate the most
fundamental unmet needs in the United States for medical care,
housing, and the education of our children.
In President Bush's 2004 budget, the
$379 billion military cost exceeds the sum of all other "discretionary"
(non-mandatory) items in the Federal budget.
The publicly funded colleges and universities
have been raising their fees every year toward the target level
set by the Ivy League schools. None of this happens overnight,
but the direction of development cannot be mistaken.
The United States is now a species of
State Capitalism. The top federal government executives are a
partnership of top political and corporate managers who operate
a war economy to enlarge their power as their main continuing
goal. The idea that the U.S. can afford guns and butter without
limit is proven false every day. Unemployment levels that are
the hallmark of deep depression are now visible as additional
millions "leave" the labor force and are not counted
as unemployed by the Federal government even though they are
actually jobless. Hence, an 8% "unemployment" rate
as counted by the Federal government actually refers to 16% jobless.
Meanwhile, the infrastructure of American society shows decay
that can no longer be concealed despite the practiced showmanship
of leading public officials.
All this cannot be blamed on any particular
former president or congress, for they are all implicated. Since
World War II, they have all participated in furthering the Permanent
War Economy.
Meanwhile, America's corporate managers
have been proceeding with their very own profit-making business
as usual. While millions of Americans suffered losses of savings
and pension funds from the 2001-2 meltdown of corporate securities,
the same events in the securities markets helped to create a
new class of economic royalty. Corporate and government insiders
used their positions to know when to buy and when to sell in
the securities markets and thereby amass enormous personal profit.
A new royalty was created, with royal outfitting: palaces (not
just big houses); staffs of servants with butlers trained to
oversee the underlings; lavish cars and other accoutrements as
displayed in the New York Times advertising for luxury goods;
and so on.
What can we expect from the new American
royals? Mr. Gary Winnick, once chairman of Global Crossing, has
shown the way. He gained a profit of $860 million by selling
his company stock before the shares became worthless.14 He told
a congressional committee that he "would write a check for
$25 million to cover part of the retirement money several thousand
employees lost when the stock collapsed." Said Winnick,
"I call on other chairmen and CEOs of other companies to
step up and write a check." (15)
Meanwhile, as demonstrated in the American
Society of Civil Engineers' Report Card for America's Infrastructure,
the services from roads, bridges, transit, energy supply, drinking
water, etc., etc. are all in deteriorating condition, deserving
a combined Report Card rating of D+. (16) All this is an important
indicator of the opportunity cost, of what has been forgone,
as a consequence of the Permanent War Economy.
Further evasion is out of order. We must
come to grips with America's State Capitalism and its Permanent
War Economy. Failing that, there is no hope for any constructive
exit. We must marshal the money and human resources that are
needed to restore jobs and production competence--industry by
industry. That is why I called particular attention to the methods
for reindustrialization as in the subway car manufacturing industry.
Since all this is controlled by public money, an alert public,
with energetic participation by alert unions, is strategically
situated to trigger a reindustrialization process.
I am pleased to report that with initiatives
from the Steelworkers and other unions, a Landmark Growth Capital
Partners (LP) Fund has been formed to assemble retirement funds
from trade unions and individuals to facilitate investments in
worker-friendly industrial and other companies needing capital
to modernize or expand. At this writing, $78 million is in hand,
with near future prospects for additional funds of some $2 billion
from unions and worker-friendly private capital funds. Tom Croft,
who has been a director of the Heartland Labor-Capital Network
informs us that the main prospective participating union pension
funds include the Steelworkers, UNITE, International Union of
Electrical Workers, United Mine Workers, United Food and Commercial
Workers, Local 1199 of Service Employees International Union,
United Brotherhood of Carpenters, International Association of
Machinists and Aerospace Workers, and The City of New Haven Pension
Fund. (17)
Seymour Melman
is emeritus proessor of Industrial Engineeering at Columbia University.
His latest book is After
Capitalism: From Managerialism to Workplace Democracy. Visit
his website: After
Capitalism.
Notes.
1. Seymour Melman, After Capitalism:
From Managerialism to Workplace Democracy (Albert A. Knopf, 2001),
Chapter 3. Also: Seymour Melman, What Else Is There To Do? (National
Commission for Economic Conversion and Disarmament, 1996).
2. Jon Rynn, "Why Manufacturing
Matters" on www.aftercapitalism.com
website. Return to text after Footnote 2.
3. "Indian Nurses Sought To Staff
U.S. Hospitals," New York Times, February 10, 2003.
4. Bob Herbert, "Young, Jobless,
Hopeless," New York Times, February 6, 2003.
5. Special Calculation by Dr. Greg Bischak,
Senior Economist, Appalachian Regional Commission.
6. Jack Welch and John A. Byrne, Jack:
Straight From The Gut (Warner Business Books, 2001), pages 313-314.
7. Thomas F. O'Boyle, At Any Cost: Jack
Welch, General Electric, and the Pursuit of Profit (Alfred A.
Knopf, 1998), page 33.
8. "Is Your Job Next?" Business
Week, February 3, 2003, pages 50-60.
9. "Is Your Job Next?" page
57.
10. After Capitalism, pages 100, 137,
140, 142, 143n.
11. Department of Defense, Program
Acquisition Costs By Weapon Type, p 41, at website .
12"The Price We Pay," New York
Times, February 15, 2003.
13. After Capitalism, Chapter 5.
14. "Adding to Claims Against Global
Crossing," New York Times, January 30, 2003.
15. "Global Crossing Head Offers
Workers $25 Million," New York Times, October 2, 2002.
16. ASCE Report Card available at http://www.asce.org/reportcard/
website.
17Website: www.heartlandnetwork.org;
Email: heartland.sva@att.net
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