issue 221 - July 1991
Making arms is good for the economy. Or so the story goes. But
Stephen Dale finds the pet of the industrial world devouring its creators.
There are plenty of landscapes throughout the world - like the bombed-out streets of Baghdad or Beirut - which speak about the terrible destructiveness of militarism. But many North Americans are coming to see the blighted boulevards of Boston, Baltimore and New York as symbols of the same phenomenon.
Though spared the effects of actual military assault most urban centres in the United States have been battered by economic conditions which derive directly from the avarice of the military-industrial complex. Civilian industries collapsed creating huge unemployment and fuelling epidemics of drug abuse and crime during the 1980s, while the US military dinosaur was fed a budget that had doubled in size in just one decade.
The conventional wisdom used to be that military spending is good for an economy. That its activities galvanized - fertilized even - the rest of the economy. All that is changing as people become more critical and impatient. In the words of New York City Mayor David Dinkins: 'We need more homes for our people - not more home ports for nuclear battleships.' The cost of just two B-2 bombers could eliminate the city's 1991 deficit.
Siphoning money out of the civilian purse and into defence is not likely to do any country much good. The fate of the Soviet Union is a clear example. But the deterioration of the vital US economy is the most dramatic testament of how rapidly degenerative the process is.
The moment of truth may have been forestalled by a new wave of jingoism unleashed by the war against Iraq. But it's clear that North Americans will sooner or later have to face up to the conditions wrought by a weapons-centred economy.
What they can already see is that New York City - referred to in the New York Times as 'Calcutta, USA'- has more beggars on Broadway now than during the Great Depression; that infant mortality and life expectancy rates in many neighbourhoods are on a par with the Third World; that 83 per cent of the city's schools are in disrepair and that the water mains break at a rate of ten per week.
If they want to know why this is, all they need do is look at the statistics. These show that between 1947 and 1989, US military budgets totalled a staggering $8,200 billion - more than the joint value of all US industry's plants and equipment and all the country's civilian infrastructure combined. In other words, money given to the military after the Second World War could have rebuilt the largest portion of what is human-made on the surface of the United States.1
How on earth did the public give political support to this astronomical level of spending? One reason is that they had the jobs carrot dangled before their noses. But even this is no longer a winner today. Chicago, for example, pays an annual three billion dollars more in taxes to the Pentagon than it receives in military jobs.
The global picture is sadly similar. The world now spends one million million dollars on the military annually. Spending rose by 150 per cent between 1960 and the late 1980s. The fastest growth was in Third World nations, which now account for 20 per cent of military expenditures compared with seven per cent in 1960. That's an enormous burden considering the other problems they face. Military spending and debt servicing account for half of all government outlay in the Third World.
It's not just the raw sums that are important. The investment of human energy and resources count too. Half a million of the world's scientists are doing research and development for the military. This costs more than the total amount spent on developing technologies for new energy sources, improving human health, raising agricultural productivity and providing family planning.2
The logic behind current calls for conversion' from military to civilian production is that resources would be better spent on solving social problems. But there is more to it than that. The military-industrial complex has certain special characteristics that make it both inefficient in itself - and profoundly damaging to the economy m which it operates.
Seymour Melman, Professor of Industrial Engineering at Columbia University, has examined this in detail. He points out that military firms don't seek 'internal economies' to minimize cost because the defence services which buy their products don't care much about cost. So when military firms come to dominate an economy they spread their 'cost maximizing' methods to civilian producers.
Furthermore, unlike spending on roads, or education or machine tools, military investment has no positive impact upon a country's productive capacity.
The net effect is that American firms can no longer produce civilian goods as cheaply or as well as their overseas competitors, Japan and Western Europe. Britain, with its high investment in military industry, is in a similar position to the US.
The effects of the military economy don't stop there. Having abandoned most consumer manufacturing, Americans have had to borrow from abroad in order to finance their purchases of foreign consumer goods. The result: they have the biggest national debt in the world.
According to Melman there is really only one way of reversing this cycle of decay - a massive redirection of the funds now in the hands of the military. Supefficial cuts to the defence budget just won't do it. His 'Save America Budget' calls for a 1,500 billion-dollar peace dividend over the next 10 years.
Defenders of military industries try to deny any link between military production and economic decline by pointing to the technological innovations arising from military-sponsored research. It sounds plausible. But a variety of studies have shown that any such civilian spin-offs are generally accidental and very expensive.
In her classic work The Baroque Arsenal British economist Mary Kaldor discovered that most military research conducted after the Second World War was for devices too specialized and too sophisticated to have any application in the civilian marketplace - which thrives on cheap, dependable, mass-producible goods.
Kaldor's thesis was reaffirmed last year by economists Erik Poole and Jean Thomas Bernard who found that military work had a negative impact upon the productivity of the Canadian aerospace and electronics industries.
Perhaps this has something to do with the penchant of military manufacturers for wasting huge amounts of public money. The Canadian Patrol Frigate program is a prime example. The Canadian Government had to bail out the two main contractors when it learned that the 12-ship program was two years behind schedule and each ship would probably require one million hours more work than budgeted for.
One contractor blamed this debacle on the 45,000 design changes its partner had ordered; the other retaliated with a more general charge of incompetence.
A new era
But many people throughout the world are saying that it is time to replace these woeful tales with civilian success stories. It's been estimated, for instance, that the Soviet Union could earn $40 or $50 billion more in foreign currency if it simply redirected from the military the funds necessary to expand its oil production.
Similarly, Britain could save $18 billion a year by merely bringing military spending into line with other European NATO members.
In the approaching era we can expect to see some big military spenders faced with unmanageable economic problems. Whether they like it or not they will have to rationalize their military industries and make strategic retreats from their costly Cold War game-plans.
But don't expect a reversal of the old militarist postures which conversion advocates would like to see as part of the package. That would require sustained public outrage over what all these expensive gizmos are actually used for.
Canadian Journalist Stephen Dais is currently producing a radio series on arms for CBC.
1 J Fetdman, N Kninsky, Seymour Melman National Commission on Economic Conversion and Disarmament (ECD), June 1990.
2 Our Common Future, World Commission on Environment and Development, OUP, 1987.
With his dark glasses and his uniform, Zé Luls looks like the comic-book Latin American military man who would gleefully send in armoured cars against his own people if they got too noisy. But 26-year old Zé Luis doesn't command armoured cars - he makes them.
Or used to, that is. Two years ago he and 750 fellow workers from the Engesa plant in Sao José dos Campos near Sao Paulo were suddenly laid off. The military-style uniform is from his new job - after months of unemployment - as a bank security guard.
Engesa became a major Brazilian success story through the export of cheap, reliable armoured vehicles Ideal for use In civil wars or for controlling popular unrest. His business began to run into trouble in 1988 when an outbreak of peace in its two major markets Africa and the Middle East - caught It over-extended in its $100 million 'dream project': the Osorio battle tank.
'It's a tank and a half, that Osorio,' says Zé Luis with an unmistakable note of pride at having been involved In the production of such a formidable piece of equipment.
The pride is evident in the way Zé Luls describes all Engesa's machines, which his job involved finishing off and packing for export to Iraq, Angola, Zimbabwe, Guinea, Cyprus, or China. The Urutu armoured personnel carrier - a best-seller thanks to its suitability for riot control - and the Cascavel armoured car (ideal for anti-guerrilla patrolling) are 'real precision vehicles, whatever mission you give them, they'll accomplish'.
Zé Luis accompanied one such 'mission', to Angola. As part of a maintenance team he was able to see what happens when a country ploughs all its resources into a long and debilitating civil war - making vast profits for the international arms business.
'I didn't like Angola much,' he says. It was too hot, too poor, too dirty, too full of diseases. The Angolans are nice, simple people. They didn't seem to want the war.'
What Zé Luis saw didn't cause him to question the industry In which he worked. 'Sure we knew we were making things that killed, but that wasn't our business. The vehicles were commanded by people, and they were the ones responsible for the destruction.'
Though depressing, Zé Luis thinks the experience in Angola was worth it. 'The pay's a lot better if you get sent overseas'. And that, perhaps Inevitably, is the crux of it.
'Engesa was always known as a good company in Sao José doe Campos,' Zé Luis explains. 'A job there guaranteed you credit in the shops. Engesa always paid on time and there were never strikes. So when the boss came down and told us the company was going through a bit of a crisis but that everything would be OK shortly, we believed him, didn't we? When they suddenly went and sacked 750 of us in one day, it was the last thing any of us expected from Engesa.'
There were more surprises In store, however. Since 1987 the company had been deducting the redundancy fund payments from the workers pay-packets - but not making the appropriate with the federal social security fund. So now there is no cash for redundancy payoffs to the total 1,350 workers sacked. The company filed for bankruptcy in March 1990, admitting debts of $250 million.
'There are rumours that a British company is interested in buying Engesa,' says Zé Luis. 'It would be a good thing-as long as they didn't go back to building tanks. They shouldn't invest in making things that destroy. The company used to have a really good line of tractors - maybe they could invest in them.'
In fact, a deal has been practically sewn up between Engesa and British Aerospace which - according to the Brazilian press - hopes the have the plant running again soon... building tanks.
This article is from
the July 1991 issue
of New Internationalist.
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