Global Teach-In Blog, Post 1

Congress coddles military while neglecting Sandy victims and violence prevention

By Brian D’Agostino

What I find remarkable about the recent “fiscal cliff” debate in the United States, which is now morphing into the “debt ceiling” debate, is the absence of America’s bloated and obsolete war economy from the discussion, even as vitally needed programs are on the chopping block.  For two months, right wing Republicans in the House of Representatives held up $60 billion in emergency aid to victims of Hurricane Sandy, insisting that it be paid for by cuts to other essential programs.  Nor has there been any discussion in Congress — three weeks and counting since the Newtown Connecticut school massacre — of funding for mental health and wellness programs for all who need them, which could prevent future tragedies.  As the International Psychohistorical Association (IPA) noted in its statement “How to End Violence in America” (download here), such programs would cost a tiny fraction of the hundreds of billions of dollars that America spends every year on unnecessary weapons systems, military bases, and prisons.

In my new book The Middle Class Fights Back, I outline visionary but practical policy alternatives to the austerity agenda and callous inaction of a Washington elite beholden to right wing ideologues, corporate CEOs, and predatory investors.  One of these initiatives is a Green New Deal that can put millions to work while speeding up the transition to renewable energy, thus mitigating future catastrophes like Hurricane Sandy.  Such massive public investment can be paid for by carbon taxes, greatly increased taxes on the rich (under Republican President Eisenhower the highest marginal rate was 91%), and diverting resources from the war economy.  A second initiative is an innovative option for corporations to issue stock to their workers in lieu of the corporate income tax, which would make corporations that empower their workers more competitive than those who cling to the past.  For more information on the book, visit my website at middleclassfightsback.org.

Why Not Falling Off the Fiscal Cliff Requires Conversion

By Jonathan Michael Feldman

Don’t Just Cut the Defense Budget With Laissez-Faire Economic Policy

Progressive and left leading economists have proposed military budget cutbacks,  increased taxes and closing loop holes as ways to reduce the deficit.  The problem with the first proposal is that it often is not accompanied by proposals to create civilian alternatives for defense firms.  Does the left seriously think that the defense firms will “say uncle” and allow their budgets to be cut without a serious fight?  And if they are forced to “say uncle,” does the left believe that laissez-faire solutions will work and that defense firms can manage the transition as easily on their own as they could without some kind of planning effort involving the government?

Defense firms are part of an alliance with the Congress, parts of the government, and their suppliers, i.e. the military-industrial complex, that also involves universities, members of Congress, and other key actors, like “defense intellectuals” in various think tanks.  This large scale constituency is well positioned to fight cutbacks. Moreover, there are many defense-dependent regions and local communities which would be hurt by military budget cuts in the absence of civilian alternatives to lost jobs and economic activity.

Why Cutting the Military Budget without Civilian Planning is Insufficient

Consider a few problems.  First, many companies are highly defense dependent and require assistance or prodding to go into civilian markets.  For example, companies like Lockheed-Martin and Nortrop-Grumman are about 80 percent or more defense dependent.  These companies have engineers and managers who are usually oriented to serving the military markets and military designs rather than meeting civilian requirements.

Second, defense firms and communities are now mobilizing politically to oppose cuts, i.e. there is the threat of a political backlash.  This backlash was part of Romney’s political campaign (corresponding to real interests in fighting military cuts).  Although Romney was not successful in convincing the majority of Virginia’s voters, despite using the argument about military cutbacks hitting that state.  Consider this report from a few months ago: “Lockheed Martin’s vice president for legislative affairs, Greg Walters, recently announced that if the $500 billion in automatic cuts to defense spending mandated by last year’s ‘supercommittee’ budget deal go through as planned, it may have to issue layoff notices to the ‘vast majority’ of its 123,000 employees.”  Perhaps that is just corporate propaganda, but it certainly contains more than a grain of truth. It’s not a secret that the U.S. spends hundreds of billions of dollars on the military and that this creates thousands of jobs.

Third, if cutbacks are made without civilian alternatives for firms and military-dependent communities, hundreds of thousands of jobs could be lost.  For example, one claim (which might be exaggerated) is that Florida could lose as many as 80,000 jobs.  Some news reports addressed the possibility that thousands of the Pentagon’s civilian employees could lose their jobs.  One report in September cited an estimate that claimed that defense cuts in Tennessee could lead to a “$809 million cut in the state’s gross domestic product.”  Let’s assume that civilian investment creates more jobs than a defense investment.  What if the civilian investment projected does not materialize to match the defense investment?  We need to consider the opportunity cost represented by lost capacity at closed plants, i.e. the failure to make useful things like wind mills, mass transit, and other new technologies at defense firms that simply junk, mothball or sell off industrial and engineering capacities.

As a result of these considerations, we need to develop civilian alternatives for defense-serving firms and communities.  This can occur by providing civilian budget investments and R&D contracts for defense firms to bid on so that they have the possibility of making new products and services.  Conversion involves advance notification, teaming with civilian counterparts, lowering overheads, relocation assistance, income subsidies for key workers, green procurement budgets, and training in diversification processes, as well as some supplemental teaming with civilian capacities.

What are the benefits of military-to-civilian conversion?

There are several benefits of a plan to support conversion and diversification of defense firms (the two concepts are similar, but not identical).

First, peace groups, environmentalists and lobbyists for defense cuts can win allies in trade unions and some companies (probably lower-tier firms because the big ones want to argue at this point that conversion is not even possible).

Second, defense firms can be turned into wealth generators rather than tax absorbers.  By making useful products they can generate incomes and profits that can be taxed, rather than absorb tax revenue by making weapons. These tax revenues could better fight the budget deficit than mothballed and closed down plants. Want evidence?  Just look at Detroit’s fiscal difficulties created by deindustrialization.  Consider the jobs that would have been lost if an industrial policy did not save GM and Chrysler.  Could this industrial policy have been more ecologically-minded and fought for a greener alternative to what was produced? Yes!  But no one took up that fight in any serious way.  A forthcoming report considers a plan to support a more ecological industrial policy for Michigan.  The US imports a lot of its mass transit products.  Here is a place where defense firms (properly teamed with civilian firms expert in mass transit) could convert to more useful activity.

Third, defense firms have a large share of the domestically-anchored manufacturing and advanced engineering capacity that still exists in the United States. Losing this capacity is a huge opportunity cost.  Converting the capacity is a net gain for producing green products and services.  Even states like Michigan known for civilian manufacturing have a significant share of defense production. That defense capacity helps stabilize the state’s industrial base whether we like it or not. If you don’t like it, then support conversion of defense firms not laissez-faire economic ideas.

Fourth, if defense firms are successful in converting, they could create domestically-anchored high quality jobs, contribute to the U.S. export machine, and thereby support higher living standards and lower the trade deficit.  The alternative, low growth and depression, eventually will promote a right-wing backlash or a steady state consensus which does not make the proactive investments in a green infrastructure and technology necessary to stave off ecocide.

Why are the Counter-Arguments Weak?

There are  many objections that can be raised to economic conversion planning to support civilian activity in defense firms backed by civilian government investments.

First, won’t money invested in defense firms for conversion contribute to the deficit?  Yes, they might in the short-run, but if the U.S. loses further its advanced engineering and manufacturing capacity, then it will soon head the way of Greece, a country largely unable to quickly generate domestically-anchored wealth.

Second, won’t defense firms fail in conversion and diversification.  Yes, if they do it the wrong way.  No, if they do it the right way (then they will have a fighting chance to succeed).  The research on how to do it the right way is extensive.  The problem is that many scholars and policy makers refuse to read the documentation (see this link and Appendix 1 below for citations).  This research shows that some firms succeed and others fail at conversion, but we know the reasons for success and failure.  Yet, we have not adopted and fought for the success formula.

Third, can’t defense firms simply export more weapons rather than convert?  Well the global recession limits the customer base found in many countries.  Japan and China might militarize further, but won’t they do it with more domestic (as opposed to U.S.) components?   Besides furthering weapons sales contributes to the cycle of violence, limited trade, and is ethically problematic.  We have to fight for conversion to limit global arms exports.  If the U.S. arms nations, contributes to their military waste, then this could crowd out civilian sales coming from  defense firms converting to civilian markets and based in the U.S.

Finally, why should this one sector be helped over and above other sectors?  The answer is simple. Defense firms are strategic assets and different from other firms and warrant special treatment because of their manufacturing capacity, engineering capacity and presence as often domestic anchors at the regional and national scales.  The high degree of specialization and often inflexibility of these firms is yet another reason why these are strategic industries.

Support the economic conversion of defense firms by writing your Congressperson, mayor, local elected official and newspaper.  Send them this link.  Get them informed!  Don’t reward laissez-faire, do nothing solutions that will further weaken the U.S. economy and the suffering of depressed living standards and the loss of production capacity to produce needed green products and services!  Make this part of your NGO or social movement’s agenda.

Appendix 1: Defense Firms Can Diversify if They Do It Right

Recent claims made in Forbes that defense firms won’t diversity are misleading. The right question is: What does the United States need to do to enhance its economic and strategic security? More soft power, more alternative energy and mass transportation, more wealth producing activities that relate to these through green manufacturing, etc. Less hard power and military hardware and less cycle of violence military campaigns in the Middle East.  What did the Forbes article fail to consider?

First, ironically Defense News showed on April 14, 2012 the empirical data that debunks the premise in “Companies Turn Toward Diversification,” mentioned General Dynamics and their acquisition of Vangent.

Second, the long term political horizon does not look good for defense budgets in the sense that both the T-Party and the Occupy Wall Street movements have argued for military budget cuts. Of course, a new crisis is possible that would trigger more defense spending, but the U.S. military budget seems to be increasingly paid by unsustainable Japanese and Chinese debt. How long can debt-driven defense spending go on without a major economic crisis triggering military budget cuts?

Third, it is partly irrelevant that “skills are fungible, behaviors aren’t.” When defense firms or military-serving divisions have been forced to change behavior with the correct managerial group, then they have sometimes done so. The idea that diversification was “unblemished by success” is totally wrong, factual incorrect and the counterexamples have simply been ignored, see for example my write up about how Boeing Vertol learned to make subway cars (cited below). Of course, the incentives for making helicopters was greater than subways, but that is not a behavior issue, that is a question of market signals. For why those might change, see above.

Fourth, not all defense investors hate diversification, as the Defense News article points out. Most firms would choose survival over suicide. Some diversifications have been very successful, whether or not defense analysts want to be honest about it. For example, McDonnell Douglas had a very successful spin-off that I documented (see article discussing Vitek, cited below).

Why are the successes few? The post-Cold War propaganda campaign against diversification was largely successful. It continues today.  The political question of “what to produce” is a taboo for the right, ignored by postmodern abstractions. The government failed to develop a comprehensive civilian industrial policy. Yet, when even marginal interventions were made, under the right formula, diversification succeeded. It really is the reader’s responsibility to identify the formula (and the shareholders for that matter).

References:

Feldman J M, 1999, “Civilian diversification, learning, and institutional change: growth through knowledge and power,” Environment and Planning A 31(10), pp. 1805 – 1824. (On McDonnell Douglas).

Jonathan M. Feldman (author), Gerald I. Susman and Sean O’Keefe, eds. Chapter 18, The Defense Industry in the Post-Cold War Era: Corporate Strategy and Public Policy Perspectives, “The Conversion of Defense Engineers’ Skills: Explaining Success and Failure Through Customer-Based Learning, Teaming and Managerial Integration,” pp. 281-318. Oxford: Elsevier Science, 1998. (on Boeing Vertol).

The author is a principal convenor of the Global Teach-In: www.globalteachin.com.

Why is manufacturing important?

Why are Manufactured Goods Important?

1) Manufactured goods are necessary for trade. According to the World Trade Organization, 80% of interregional trade is in goods, and only 20% is in services. For the U.S., the statistics are about the same. That means that we need goods to trade for foreign goods, or we rack up a large and growing trade deficit, which the United States has been doing for many decades now. This will eventually threaten the value of the dollar; if the dollar becomes very cheap, imports will become very expensive, and the U.S. won’t have the capacity to replace imports. In addition, the global trade system has become very unbalanced, with many nations basing their own growth on growth of exports to the U.S., even though they keep taking dollars instead of goods. This state of affairs can not go on forever; even Ben Bernanke, the Chairman of the Federal Reserve, has said so.

2) Manufactured goods are crucial for the service industries. Even though about two-thirds of most economies are composed of service industries, these service industries are dependent on manufactured goods for their operation and for their own technological progress. For instance, the retail and warehousing industries, which comprise about 11 percent of American GNP (value-added), are in the business of selling manufactured goods. The airline industry, the telecommunications industry, and the software industry depend on airplanes, phones and broadcast equipment, and computers for both their existence and for their technological progress.

3) Each manufacturing job creates three other jobs. In the U.S., the Economic Policy Institute has found that each manufacturing job supports three other jobs in the wider economy, through something called “the multiplier effect.” That is, the wages from manufacturing employees are re-spent in other parts of the economy, because manufacturing adds so much value to the economy.

4) Economic growth depends on manufacturing. Manufacturing productivity, that is, the goods that are output from a specific amount of input, increases by about 3 percent each year in the U.S., year in and year out, because technological advances are always being made for factory machinery. By contrast, service industries either have very slow productivity growth or depend, directly or indirectly, on technological progress in machinery. In addition, since machines can make other machines, what is called exponential growth, as in quickly reproducing animal populations, can take place.

5) National power depends to a great extent on manufacturing power. Over the last 100 years, the “Great Powers”, or most powerful four or five countries, have controlled about 75 percent of global industrial machinery production.This is because industrial machinery is used both to generate national wealth and to produce military equipment. If all regions of the world had an independent capacity to produce manufactured goods, there would be little opportunity to intimidate and dominate countries. In fact, there would probably be fewer wars because global power would be balanced.

6) A world in which all regions had a strong manufacturing base would go far to eliminate poverty and war. Manufacturing creates middle class jobs that anchor a middle class economy. Unions thrive in manufacturing industries because it is easier for the employees to bargain. If all global regions have the power to create the wealth that comes with manufacturing, there will be less opportunity for wars to break out as a result of imbalances of power.

 

 

About Diego Rivera’s mural: The panel represented above is a portion of Rivera’s grand mural series at the Detroit Institute of Arts: “The Detroit Industry fresco cycle was conceived by Mexican muralist Diego Rivera (1886–1957) as a tribute to the city’s manufacturing base and labor force of the 1930s. Rivera completed the twenty-seven panel work in eleven months, from April 1932 to March 1933.” The section depicted shows not only social divisions but an industry tied to a then petroleum-based manufacturing technology. Today, Detroit and the industry attempt to diversify into greener cars with ongoing initiatives to bring more rail-based mass transit to this auto-centered city.

How can we cut the US military budget?

The central obstacle we face in cutting the U.S. military budget is rooted in the nature of the political-economy of the military-industrial-congressional complex or MICC.  All economies are political economies, hopefully with a small ‘p’ and a large   ‘E,’  but the MICC is a political economy with a large ‘P’ and a small  ‘e.’  

The habitual modes of conduct shaping the P-e relations at all levels of the MICC, from the macroscopic behavior of large organizations as a whole (government and industry) to the microscopic behavior of the individuals making up these organization, is the product of a cultural evolution taking place over the last 60 years.  The evolution is connected to a bottom up self-organizing process.  This process is driven by the interplay of chance and necessity at the microscopic scale of organization conditioned by some sort of selection process that creates  an increasingly complex order without conscious design at the macroscopic scale. In other words, the MICC initially evolved without much long-term forethought by decision makers in the U.S. Congress, the Pentagon, and the defense industry.  Budgets reflect a reaction to meeting constituent needs and larger political pressures associated with the constituencies of the MICC As the complex becomes more powerful, that emerging order then feeds back on itself to create growing top- down pressures on the selection process that is shaping it.

What emerged is a top-down positive feedback loop that sustains and amplifies the evolution. Therefore, the accumulation of various districts lobbying for and receiving military spending, and in so doing, becoming dependent upon the increased flow of money, has been the increased power of the planning bureaucracy in the Pentagon and its political allies in Congress and defense industry.  In this way, the MICC feeds the localities and the increasing dependence of those localities increases the power of the MICC.  When viewed this way, it becomes clear that the MICC is a complex adaptive system, in the precise meaning of the term. But the order of that system was not designed by the “designing mind” of top-down influences; it emerged out of bottom-up pressures that became progressively conditioned by top-down influences.  If I am right in this diagnosis, then any effort to shape the future evolution of the MICC must address this elemental nature or else that effort is doomed to fail.

Over the years, without intending originally to do so, my work in the Pentagon evolved into a sequence of efforts to explain and document how the MICC operates.  Looking back, I endeavored to explain outline how the big ‘P’ works (‘P’ includes the bureaucratic politics as well an elective or economic politics).  This led me, for example, to write a pamphlet Defense Power Games in the summer of 1990 explaining why there would be no peace dividend after the end of the cold war.  (Unfortunately, about three weeks later, Saddam Hussein invaded Kuwait, I had to modify it slightly at the front end to account for that, but it remained essentially same).  To reduce the defense budget you have unravel these power games–i.e., front loading and political engineering–from the bottom up.  My 1996 paper Defense Budget Time Bomb (subsequently published in the economic policy journal Challenge) used the case study of Air Force tactical fighter aviation to explain what would happen if business as usual continued and why that unraveling was necessary.   I proposed one way for defusing the budgetary time bomb and reducing the defense budget in my June 2002 testimony to Congress (there I tried to combine bottom-up activities with top-down pressures to evolve a set of solution pathways). In Jan 2011, I brought much of this work together in The Domestic Roots of Perpetual War (which was also the first chapter in The Pentagon Labyrinth, a manual for understanding how the Pentagon and MICC operates).

The problem you face–we all face–is that the use of persuasive logic and reason to explain why the MICC is damaging the economy and therefore convince people it should be reduced in size has not and will not work.  Sound reasoning and irrefutable evidence along the lines argued by stalwart opponents of military over-spending like Seymour Melman did not result in corrective action, for example.

The fact is factional political-economic interests trump the rule of reason–which is the central reason why the Framers of the Constitution were hung up on checks and balances in a system of overlapping (not entirely separated) power centers.  So, my view is that we must figure out a way of attacking the political dimension.  This means we need to cope with the ability of the Pentagon to win local constituencies, make their regions economically dependent, and build up excessive factional power at the expense of others. If we accept that the MICC is fundamentally a complex adaptive system, evolved over the long term through cultural evolution, that means the likelihood of imposing a political solution from the top-down (by a rational deus ex machina) is virtually nil.  National solutions that don’t provide alternatives on the ground, in local political communities and economies won’t easily work.  Cosmetic military budget reductions, like those after Vietnam and the collapse of the Soviet Union, won’t reduce (and may increase) the pressure for perpetual war, with  military budget hikes waiting just around the corner, as happened in the late 1970s and late 1990.

The only alternative, therefore, is a bottom up strategy centered on the ideas of building a power base by penetrating (infiltrating), undoing, and/or discrediting the habitual modes of conduct that give the MICC its staying power.  Over time, if this approach can build momentum, and if and when it does, nodes of top down pressure may emerge to compliment and reinforce the evolution along a more constructive political-economic pathway.  There is an obvious parallel to guerrilla war.  Therefore, just like the Pentagon gained top-down power from bottom-up solutions, so to reformers must cultivate such bottom-up solutions.

The power of the Arab Spring the Occupy movements (both of which are now being undermined by top-down inspired counter-revolutions) lies in the fact that they are spontaneous, self organizing bottom-up processes. Ideas of micro finance (e.g. local credit unions) may aid in the evolution toward a financial system that precludes too-big-to-fail mega banks.

Traditional political alternatives have been based on the idea that one can design and impose a top-down solution. This kind of planning has its place, but at this point in time, it seems to me a strategy of focusing weakness against strength.  I do not think it can take root before more ground work has been laid by a bottom-up efforts that soften (discredit) the power of resistance by the entrenched political interests–in the particular case of this discussion–by efforts to destroy the big ‘P’ inequities of the MICC.  I think bottom-up anti-MICC efforts would be in natural alliance with the Occupy movements.

About the Author

Franklin C.  “Chuck” Spinney (born 1945) worked in the Office of the Secretary of Defense in the Pentagon for 26 years after serving eight years in the Air Force. He became famous in the early 1980s for the “Spinney Report.”  This study criticized what he described as the Pentagon’s reckless pursuit of costly complex weapon systems. Senator Chuck Grassley (R-Iowa) called Spinney the “conscience of the Pentagon.”

Global and European economic alternatives

“The EuroMemorandum seeks to set out a critical analysis of recent
economic  developments in Europe and to present the basis for possible
alternative policies. It is intended as a contribution to the critical
discussion in intellectual and social movements in Europe, and in solidarity
with all those struggling against the impact of the deeply regressive,
anti-social policies of the European authorities.”
For more information, go here.


“As in past times of crises, disparate groups have come together to propose a new solution to an epochal challenge. The Green New Deal Group, drew inspiration from the tone of President Roosevelt’s comprehensive response to the Great Depression to propose a modernised version, a ‘Green New Deal’ designed to power a renewables revolution, create thousands of green-collar jobs and rein in the distorting power of the finance sector while making more low-cost capital available for pressing priorities.”

For more information, go here.


“ILO calls for stronger coherence between labour  and  climate agendas. As the 17th Conference of Parties of the UN Convention on Climate Change enters its second week, the International Labour Office is organizing and participating in a series of events aimed at addressing the challenges and opportunities of climate change impacts and policies on the world  of work.”
For more information, go here.

The fiscal crisis of New York State

The New York Times recently ran a story, “Deficits Push N.Y. Cities and Counties to Desperation,” March 10, 2012. Here is our response posted at the Times webpage:

We can easily solve this problem of austerity and fiscal cutbacks. The problem is that our politicians are too focused on placating the financial sector at the public’s expense. Here is a recipe for turning things around in New York City.

First, award more points for local sourcing of mass transit during procurement negotiations.

Second, set up an industrial extension/modernization program for mass transit suppliers.

Third, follow the lead of Pennsylvania and create industrial policy incentives for alternative energy production, build niche markets in government buildings, properties, schools, etc. throughout the state to create a market for these local job creating firms.

Fourth, start talking about the dramatic costs of the military budget on New York State financing. The state pays billions in tax dollars and much of this money goes elsewhere. So either have the Pentagon start building light rail systems in up state New York (not the preferred option), or cut the military budget and redirect that into economic incubators for green jobs throughout the state.

Fifth, take the payroll deposits and other elements of New York’s financing and use them to start a New York State bank. Fight for legislation to promote and organize this new state bank. Use that bank to seed the incubators and green industries and mass transit systems described above.

Go to www.globalteachin.com and read about how we are promoting the advanced agenda.

Regards, The Global Teach-In

A reader posted this comment:

There were “multi-year backloaded tax cuts that started under Governor Mario Cuomo and continured through the Pataki administration. These tax cuts resulted in lost revenue to NYS in 2007-8 ($21.2 billion); 3008-9 ($21.2 billion); 2009-10 ($15.3 billion); 2010-11 (13.5 billion).”

How can we pay for new wealth?

President John F. Kennedy’s Plan to Promote New Wealth: 
General and Complete Disarmament, Cutting the Military Budget

One way to pay for green jobs and sustainable growth is by reducing military budgets and promoting progressive tax policies.  We are partially inspired by the example of John F. Kennedy who supported general and complete disarmament:   Continue reading

What do we mean by new wealth?

Perpetual growth under present circumstances threatens the ecosystem. The current system of energy usage is unsustainable. Zero growth in a depression threatens to create a permanent class of unemployed and underemployed persons, however. Debts and imports can rob wealth, but simply cutting deficits without generating wealth and growth will further erode living standards and democratic control. Scarcity leads to infringements on democracy and worsens poverty. The growth of waste–tied to war, rising administrative overheads in bureaucracies, consumption of less than socially useful luxury products, and use of energy-intensive transportation systems–will promote the kinds of growth that threatens the ecosystem and the economy. Oil imports can reduce security, increase debt and further the kinds of waste that undermines the economic foundations of a national economy. Continue reading