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

Learning About The Past. Thinking About The Future.

“The logic of planetary responsibility is aimed, at least in principle, at confronting the globally generated problems point-blank—at their own level. It stems from the assumption that lasting and truly effective solutions to planetwide problems can be found and made to work only through the renegotiation and reforming of the web of global interdependencies and interactions. Instead of aiming to control local damage and local benefits derived from the capricious and haphazard drifts of global economic forces, it would pursue results in a new kind of global setting, one in which economic initiatives enacted anywhere on the planet are no longer whimsical and guided by momentary gains alone, with no attention paid to the side effects and ‘collateral casualties’ and no importance attached to the social dimensions of the cost-and-effect balances. In short, the logic is aimed, to quote Habermas, at the development of ‘politics that can catch up with global markets.’”

Zygmunt Bauman, Does Ethics Have a Chance in a World of Consumers?, Cambridge: Harvard University Press, 2008: 29.

Continue reading

A Comprehensive Global Agenda Is Needed

I. Democracy  Networks
The concentration of  power in large corporations and banks has placed serious constraints on democracy. Many large companies have outsourced work overseas and failed to organize work at home. The megabanks, backed by bond rating agencies and governments, have created austerity programs, and have received bailouts when  many are jobless or homeless.Yet, we have democratic responsibility for the economy (taking the form of bailouts) without democratic influence on how these bailout funds are invested.  The result: disinvestment and austerity for the majority—while a massive public investment helps the private big corporate minority. We need to organize globally and locally to counteract the non-democratic power of these mega-institutions. Continue reading