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SECTION
2
Disarmament and the Economy
In
this section we shall briefly examine some of the common features of the
studies that have been published dealing with one or another aspect of the
expected impact of disarmament on the American economy.
Whether
disarmament is considered as a by-product of peace or as its precondition,
its effect on the national economy will in either case be the most
immediately felt of its consequences. The quasi- measurable quality of
economic manifestations has given rise to more detailed speculation in this
area than in any other.
General agreement prevails with respect to the more important economic
problems that general disarmament would raise. A short survey of these
problems, rather than a detailed critique of their comparative significance,
is sufficient for our purposes in this Report.
The first factor is that of size. The "world war industry," as one
writer [7] has aptly called it, accounts for approximately a tenth of the
output of the world’s total economy. Although this figure is subject to
fluctuation, the causes of which are themselves subject to regional
variation, it tends to hold fairly steady.
The
United States, as the world’s richest nation, not only accounts for the
largest single share of this expense, currently upward of $60 billion a year,
but also,
"...
has devoted a higher proportion [emphasis added] of its gross national
product to its military establishment than any other major free world nation.
This was true even before our increased expenditures in Southeast Asia."
[8]
Plans
for economic conversion that minimize the economic magnitude of the problem
do so only by rationalizing, however persuasively, the maintenance of a
substantial residual military budget under some euphemized classification.
Conversion of military expenditures to other purposes entails a number of
difficulties. The most serious stems from the degree of high specialization
that characterizes modern war production, best exemplified in nuclear and
missile technology. This constituted no fundamental problem after World War
II, nor did the question of free-market consumer demand for
"conventional" items of consumption - those goods and service
consumers had already been conditioned to require. Today’s situation is
qualitatively different in both respects.
This inflexibility is geographical and occupational, as well as industrial, a
fact which has led most analysts of the economic impact of disarmament to
focus their attention on phased plans for the relocation of war industry
personnel and capital installations as much as on proposals for developing
new patterns of consumption.
One
serious flaw common to such plans is the kind called in the natural sciences
the "macroscopic error." An implicit presumption is made that a
total national plan for conversion differs from a community program to cope
with the shutting down of a "defense facility" only in degree. We
find no reason to believe that this is the case, nor that a general
enlargement of such local programs, however well thought out in terms of
housing, occupational retraining, and the like, can be applied on a national
scale.
A
national economy can absorb almost any number of subsidiary reorganizations
within its total limits, providing there is no basic change in its own
structure. General disarmament, which would require such basic changes, lends
itself to no valid smaller-scale analogy.
Even more questionable are the models proposed for the retraining of labor
for nonarmaments occupation. Putting aside for the moment the unsolved
questions dealing with the nature of new distribution patterns - retraining
for what? - the increasingly specialized job skills associated with war
industry production are further depreciated by the accelerating inroads of
the industrial techniques loosely described as "automation."
It
is not too much to say that general disarmament would require the scrapping
of a critical proportion of the most highly developed occupational
specialties in the economy. The political difficulties inherent in such an
"adjustment" would make the outcries resulting from the closing of
a few obsolete military and naval installations in 1964 sound like a whisper.
In general, discussion of the problems of conversion have been characterized
by an unwillingness to recognize its special quality. This is best
exemplified by the 1965 report of the Ackley Committee. [9]
One
critic has tellingly pointed out that it blindly assumes that,
"...
nothing in the arms economy - neither its size, nor its geographical
concentration, nor its highly specialized nature, nor the peculiarities of
its market, nor the special nature of much of its labor force - endows it
with any uniqueness when the necessary time of adjustment comes." [10]
Let
us assume, however, despite the lack of evidence that a viable program for
conversion can be developed in the framework of the existing economy, that
the problems noted above can be solved.
What
proposals have been offered for utilizing the productive capabilities that
disarmament would presumably release?
The most commonly held theory is simply that general economic reinvestment
would absorb the greater part of these capabilities. Even though it is now
largely taken for granted (and even by today’s equivalent of traditional
laissez-faire economists) that unprecedented government assistance (and
concomitant government control) will be needed to solve the
"structural" problems of transition, a general attitude of
confidence prevails that new consumption patterns will take up the slack.
What is less clear is the nature of these patterns.
One school of economists has it that these patterns will develop on their
own. It envisages the equivalent of the arms budget being returned, under
careful control, to the consumer, in the form of tax cuts. Another,
recognizing the undeniable need for increased "consumption" in what
is generally considered the public sector of the economy, stresses vastly
increased government spending in such areas of national concern as health,
education, mass transportation, low-cost housing, water supply, control of
the physical environment, and, stated generally, "poverty."
The mechanisms proposed for controlling the transition to an arms-free
economy are also traditional - changes in both sides of the federal budget,
manipulation of interest rates, etc. We acknowledge the undeniable value of
fiscal tools in a normal cyclical economy, where they provide leverage to
accelerate or brake an existing trend.
Their
more committed proponents, however, tend to lose sight of the fact that there
is a limit to the power of these devices to influence fundamental economic
forces. They can provide new incentives in the economy, but they cannot in
themselves transform the production of a billion dollars’ worth of missiles a
year to the equivalent in food, clothing, prefabricated houses, or television
sets. At bottom, they reflect the economy; they do not motivate it.
More sophisticated, and less sanguine analysts contemplate the diversion of
the arms budget to a nonmilitary system equally remote from the market
economy.
What
the "pyramid-builders" frequently suggest is the expansion of
space-research programs to the dollar level of current armaments
expenditures. This approach has the superficial merit of reducing the size of
the problem of transferability of resources, but introduces other
difficulties, which we will take up in section 6.
Without singling out any one of the several major studies of the expected
impact of disarmament on the economy for special criticism, we can summarize
our objections to them in general terms as follows:
· No
proposed program for economic conversion to disarmament sufficiently takes
into account the unique magnitude of the required adjustments it would entail.
· Proposals
to transform arms production into a beneficent scheme of public works are
more the products of wishful thinking than of realistic understanding of the
limits of our existing economic system.
· Fiscal
and monetary measures are inadequate as controls for the process of
transition to an arms-free economy.
· Insufficient
attention has been paid to the political acceptability of the objectives of
the proposed conversion models, as well as of the political means to be
employed in effectuating a transition.
· No
serious consideration has been given, in any proposed conversion plan, to the
fundamental nonmilitary function of war and armaments in modern society, nor
has any explicit attempt been made to devise a viable substitute for it. This
criticism will be developed in sections 5 and 6.
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