They Are All Implicated
the Grip of a Permanent War Economy
by SEYMOUR MELMAN, Counterpunch March 15, 2003
Reprinted with permission.
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
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
Art, Design: 6,000
Business Operations: 61,000
Office Support: 295,000
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."
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
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
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
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 http://globalmakeover.com/JonRynn.
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,
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.infrastructurereportcard.org/