Seymour MelmanRebuilding America

A New Economic Planfor the 1990s

PAMPHLET SERIES FEATURE

Seymour Melman is Professor Emeritus ofIndustrial Engineering at ColumbiaUniversity, and chairs the NationalCommission for Economic Conversion andDisarmament. He has long been involvedin developing strategies for conversionfrom a military to a civilian economy. Hislatest books are The Demilitarized Society(Harvest House, Montreal, 1988), ProfitsWithout Production (Univ. of PennsylvaniaPress, 1987), and The Permanent WarEconomy (Simon and Schuster, 1985).

© Seymour Melman, 1992

Special thanks to David Barsamian

This pamphlet is printed entirelyon acid-free recycled paper.

Published by Open Media

Pamphlet #21Open Magazine Pamphlet SeriesOctober 1992 • First Printing

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DON'T APPLY HERE !Announced job cuts in 1992 averaged

2,700 each business day—at this rate,almost 700,000 jobs would be cut every

year:

• GENERAL MOTORS—74,000 jobsand the closing of 21 plants from 1992

to 1997;

• UNITED TECHNOLOGIES—13,900

in 1992;

• NEW YORK STATE—19,000 in 1992;

• NEW YORK CITY—30,000 jobs from1992 to 1996;

• INLAND STEEL of CHICAGO—3,500, 25% of its work force, begin-ning late 1992;

• CITIBANK—10,000 by the end of1992;

• FRITO-LAY—1,800 in 1992;

• IBM—20,000 in 1993;

• COMPAQ COMPUTER—1,400 or12% of its work force in 1992;

• MCDONNELL DOUGLAS—7,000 in1992 and 1993;

• U.S. WEST (Telephone Co.)—6,000from 1992 to 1995;

• XEROX—2,500 or 20% of its white-collar workforce in 1992;

• J.I. CASE (Farm Equipment)—4,000by the end of 1992;

• BORDEN INC. (Largest NationalDairy Producer)—1,300 in 1992;

• PHILLIPS PETROLEUM—1,100 in1992, 5% of its work force.

Figures are quoted fromthe AFL-CIO Research Dept., 1992

A new political I economic agenda for change inAmerica is needed to replace the failed policies and insti-tutions of the center coalition of RepublicansjDemocratsand the conservative right. Political and economic decayin U.S. industries, infrastructure, community, and stan-dard of living cannot be reversed by minor changes inpublic policies. The severity of unemployment and theabandonment of production and people by many manage-ments require innovative solutions to hitherto neglectedproblems. These include: how to multiply jobs forrebuilding the country's damaged infrastructure andindustry; how to carry out conversion from military tocivilian economy; how to carry out a process of demilita-rization; how to enlarge control over productive enter-prises by working people toassure workplace democracyand competence in produc-tion; how to reverse theselective decay in Americansociety. Changes of thisquality are necessary forachieving significantadvances with respect toissues such as racism,income distribution, genderdiscrimination, and elimination of military-politicaladventurism. No leader, candidate, or party has comeforward with solutions to these problems.

1.0) A political/economic crisis of unprecedentedquality is now visible in the United States, as the hall-marks of depression are all around us. Every large cityhas its shanty towns like the "Hoovervilles" of the 1930s.Real unemployment rates probably exceed 15 percent,and millions are left without any income as joblessbenefits are used up. Layoffs in the tens of thousands andfactory closings in the hundreds are announced by indus-trial firms, brokers and banks, including the blue chipenterprises. Pervasive racism and sexism mark minoritiesand women for victimization in employment, housingand health care. Water mains burst in the centers of ourcities, bridges and roads decay and become unsafe,libraries are closed and the casualties in underfundedhospitals are a medical scandal. U.S. infant mortalityrates, poverty rates, and illiteracy rates alike are amongthe world's worst for industrialized nations. By February1992, one in ten Americans were receiving food stamps.

We are all degraded by the presence of 5-1/2 million chil-dren who know hunger as a normal state. Schools anduniversities are run-down and unable to properly equiptheir facilities or hire talented teachers, and are forced toturn away fine students for want of scholarship funds. Allof these conditions mark a major product of the Americaneconomy: a growing undertrained, castoff population thatis ignored and avoided. This crisis condition has twocomponents: conventional features of business capitalistfluctuation; system decay that features a breakdown ofcompetence for production.

1.1) Conventional malfunctions of our economic sys-tem include: overexpansion of consumer credit and spec-ulative business investment, especially in commercial realestate; major inflation of security values — with pricesthat are unrelated to profitability; steadily growinginequality in income and opportunity between the havesand the have-nots. These features of business are accom-panied by fluctuation in output and employment andhave been present throughout the long history of indus-trial capitalism. But their presence does not explain thespecial qualities of the present political/economic crisis.

For this it is necessary totake into account the partic-ular features of systemdecay that have becomeacute.

1.2) During the last 40years American managershave progressively abdicat-ed the function of organiz-ing work: production has

been either consigned to overseas locations, or shut downentirely by firms. At the same time, major new investmenthas been made in military industry whose products areuseless for consumption or fur ther production.Abandonment of production is especially acute in thebasic machinery producing industries of the United States(including: machine tools, construction machinery, elec-tric generating machinery, textile machinery, miningmachinery of all classes, etc. See "The Road toUnderdevelopment," centerfold.) Dependency on importsfor means of production is a hallmark of economic under-development. Failure to invest in housing within reach ofthe lowest third of income receivers has helped generatehomelessness on a large scale. Associated failures of pro-ductivity growth, high interest rates induced by massivefederal borrowing for military expansion, and reducedgovernment investment in infrastructure and conserva-tion of natural resources have produced sustained eco-nomic decay and permanent unemployment. Meanwhile,wages to American industrial workers, until 1975 thehighest in the world, now rank 16th among 30 majorindustrial countries. System decay is also reflected in the

plague of air, water and soil pollution that has beenunleashed while federal regulators refuse enforcement ofeven modest measures to constrain further damage. In aword: the American industrial base is being reduced to ashambles.

1.3) While competence in production was beingundermined, a horde of talented men and women invent-ed and operated an expanded "casino economy," featur-ing innovations like junk bonds and leveraged buyouts.Enormous profits and incomes were taken by lawyers, topmanagers, bankers and their aides — even as productiveorganizations and facilities were dismantled for short-term profit. But all this money flow merely reallocatedclaims on available wealth while adding nothing to thestore of consumer goods and services or means of produc-tion.

1.4) Since the World War II, the largest identifiableblock of capital utilization is accounted for by the militaryenterprise, which from 1947 to 1991 used up $8.7 trillionof resources representing fixed and working capital (1982money values). This compares to the total money value ofU.S. industry and infrastruc-ture (again for 1982) of $7.3trillion. All this has beenfinanced primarily out of taxrevenue, plus federal bor-rowing that has resulted in alevel of indebtedness thatendangers the value of thecurrency. Severely damagedindustry, infrastructure andpopulations are theunavoidable outcome of the permanent war economy.The war economy has also trained and installed acounter-productivity managerial class in 35,000 primecontracting establishments. Its normal functioningdegrades the competence of the whole economy.

1.5) The U.S. war economy has produced extraordi-nary effects in the use of capital. A modern military bud-get is a capital fund; put to use it sets in motion theresources which in the ordinary industrial enterprise aretermed fixed- and working capital. In 1988 (last U.N.data), for every $100 of new civilian assets put in place inthe U.S. the military separately was allotted $50. Henceabout one out of every three dollars of U.S. capitalresources were used on the military. Compare this U.S.military-civilian ratio of 50:100 with that of Germany,19:100, and Japan, 4:100. Civilian priority in these coun-tries has yielded industrial modernity and rapid produc-tivity growth.

1.6) This combination of conventional business crisesand system decay has checkmated the ability of the feder-

al government to conduct a strategy of militaryKeynesianism: using federal spending via the permanentwar economy to regulate employment, income, andprofitability. It is impossible, after 45 years of Cold War,to operate a national economy that can deliver both gunsand butter — as during the brief four-year model ofWorld War II.

2.0) The long period of Cold War has transformed themechanisms of government. The executive branch is dom-inated by the management of the military economy. TheCongress has been functionally redefined, as a result ofthe activity of many members as virtual marketing man-agers on behalf of military contracts for industry, bases,and laboratories.

2.1) The end of the Cold War has created a grave crisisfor this government. The coalition of Republican andDemocratic party officials in both the executive and leg-islative branches now confronts a professional crisis. Themain political skills of many as intermediaries for bring-ing Pentagon money and jobs to local facilities, vital forthe Cold War period, have been rendered partially obso-

lete. The new reality leavesthe center coalition ofDemocrats and Republicansunable to operate a tradi-tional guns-and-butter poli-cy. A sustained heavydemand for resources tooperate the military econo-my checkmates the ability oflawmakers to make incomeor major public works con-

cessions on behalf of the working people left stranded bythe system decay.

Three policy responses to these problems are visible atthis writing: the coalition center; the conservative right;and a new political/economic agenda.

The Center Coalitionof Republicans and Democrats

3.0) The center coalition represents, at its core, the topdirectorates of government, industry, business and pro-fessional firms and institutions. It has proposed modest"peace dividends" and a gradual reduction of the militarybudget, in honor of the end of the Cold War. Pentagoncutbacks are proposed in the range of $5-15 billion a year,and are associated with varying degrees of alternative use— emphasizing reduction of federal deficits and indebt-edness. But these proposals from the Democratic-Republican center coalition hardly begin to meet therequirements for major repair of American industry andinfrastructure — considering only the facilities and ser-vices that are generally acknowledged as governmentresponsibility. A full response is on the order of $165 bil-

lion per year, so clearly the proposals from the coalitionthat dominated during the Cold War fall far short. (Seeback cover, "A Productive Way to Spend $165 Billion.")

3.1) Considerations of a peace dividend are irrelevantto the managers of America's military state capitalism.The government and corporate managers of this economyare locked in — by occupational self-interest, by long pro-fessional habituation and by ideology — to an industrialpolicy that accords priority to the armed forces as a pri-mary instrument of both foreign and domestic policy. Thesame industrial policy selectively rejects investment incivilian R&D and new technologies, which would enableworking people to be paid well while producing qualitygoods and services at low cost per unit. (German indus-try, paying 1-1/2 times U.S. wages, is pre-eminent as aworld supplier of machinery). A continuation of the cen-ter coalition's policies guarantees further economic, politi-cal and human deterioration. (See "Don't Apply Here!"facing page one.)

3.2) As both corporate and government managersabandon the organization of work, the consequencesextend far beyond the realmof particular factories,unions, and communities.The whole economy isdragged down since thereduced creation of produc-tive wealth translates intounemployment, poverty,homelessness, decayingfacilities and services ofevery sort. These conditionshave led to two major political/economic groups in crisis.One is an embittered, deeply resentful and hence politi-cally dangerous population of formerly well-paid, blue-and white collar workers comprising an economicallycastoff "middle class." In the absence of constructive reso-lution for their plight these people are susceptible to dem-agogic, extremist appeals (as the neo-fascists, skinheads,KKK, and the more "respectable" types like PatBuchanan). A second development is the explosivegrowth of underemployed and undereducated popula-tions located in the inner cities. Being mainly people ofcolor, they are scapegoated by the extremist right.America's economically depressed "middle class" andinner city "third world" comprise a grouping hithertounknown in this country, a lumpenproletariat (as inGermany in the 1930s): "dispossessed and uprooted indi-viduals cut off from the social class with which theymight normally be identified" (Webster's).

3.3) Corporate and government managers, preoccu-pied with short-term profitmaking and maintenance ofmilitary economy, have had little to offer to either section

of the American lumpenproletariat. These managerial goalsobstruct the major investments required for creating mil-lions of jobs that would transform the present andprospective lumpenproletariat into parts of productivecommunities.

3.4) A partnership of corporate and government man-agers operated the U.S. political economy during the ColdWar, and the conservative wing of that partnership hasmanaged the White House since 1981. They have set inmotion a class war against American working people byseverely restricting their decision-making power andholding down their incomes. Corporate managers createstranded workers and communities by moving factoriesabroad to take short-term advantage of lower wages.Factories and stores are closed when profits are not highenough, destroying jobs and laying waste to entire com-munities. Top management has consistently opposed eco-nomic conversion planning and reinvestment of vastmilitary resources in job-creating production of realwealth. This produces regional surpluses of once well-paid people made desperate for any new jobs, hence opento recruitment as "replacement workers." The ability of

working people to organizeand bargain through unionsis abridged by legalizing therights of employers to install"replacement workers" inplace of strikers. PresidentReagan showed the way, assoon as he took office, bybreaking the strike of the airtraffic controllers andreplacing them with military

personnel.Top managers of the military-industrial complex have

extended their policy of class war abroad. By 1990 theUnited States had become the world's largest exporter ofarms ($18.5 billion), and military and police training. Themilitary budgets of third world countries (minus the oil-rich states) totaled $149 billion in 1988, three times theeconomic development aid received from the rich North.Military and police training sponsored by the U.S. gov-ernment — notably in Latin America — has encouragedcounter-trade union policies of repressive military dicta-torships. In all this, the top government managers havebeen joined by their counterparts in the transnational cor-porations. The combination of economic collapse withstrong-arm policies toward working people has produceddesperate waves of immigration from third world coun-tries.

3.5) Racism, overt and covert, has been a principalinstrument for disorienting, dividing and weakeningworking people in their relation to management.

3.6) The center coalition of Republicans/Democratsconceals all this with shallow chatter about "values," fam-ily, and individual opportunity in the market.

The Conservative Right4.0) The response of the American extremist right —

wearing a mask that they label "conservative" — affirmsthe character of economy and policy that has been prac-ticed during the Cold War and accordingly affirms a con-tinuation of military state capitalism. At the same time,the rightist response features a rallying of nationalist sen-timent in the United States — blaming Japan (and otherforeigners) for diverse troubles of the American economy.

4.1) The rightist address to the well-being of the popu-lation also features overt and covert racist demagogy(anti-black, anti-Jewish, with links to classic propagandaon "international bankers" and "welfare queens"). Bysuch means the American right has been mimicking thefascist "national" political pattern of other countries.

4.2) The right has been quick to respond to spreadingdisquiet and growing resentment engendered by massivejob loss among white- andblue-collar workers. In theUnited States, as elsewhere,talented demagogues of theright have learned to playupon and amplify thedeeply felt alienation ofworking people who arefrightened by economichelplessness, their unex-plained economic troubles,and their inability to improve their condition. This is a"socialist" aspect of the radical right appeal.

4.3) First David Duke and then Pat Buchanan havespearheaded an American campaign to marshall econom-ically afflicted, unemployed and otherwise disaffectedworkers around nationalist and/or racist slogans that areproclaimed as ways of addressing economic ills. Theygive voice to many of the readily perceivedeconomic/political defects, failures and inequities ofAmerican economy and government. American industrialdecay is described as resulting from unfair Japanese com-petition, Japanese ultra-nationalist restrictions on U.S.imports, and the all-around activity of the Japanese gov-ernment and business combines — giving subsidies andsupport to Japanese firms, making them unassailable.American conservatives typically discover scapegoats forU.S. industrial decline, rather than defining the actualcauses of poor productivity or management-ordered plantclosings in many U.S. industries.

4.4) Any post-1992 president and Congress will con-

front increasingly severe economic, polit-ical and social crises at home andabroad. At their core will be the limitedcapability of government and corporatetop managers to organize work for thecreation of acceptable jobs and livingstandards. They will be pressed to makespecially forceful use of their powers,and without major institutional change apowerful totalitarian thrust is thereforeunavoidable. The federal government isnow dominated by the normally authori-tarian military and secret war-makinginstitutions of the Pentagon and CIA.(Note that $30-40 billion of recentPentagon budgets have been "black" —secret from Congress and the public; thebudgets of the CIA are not published atall.) An intensification of authoritarianmethods is reversible if, and only if, anadministration is committed to major insti-tutional change that diminishes the central-ization of power. This change will requirea process of economic conversion inorder to dismantle the centralized wareconomy, and significant measures ofdecentralization and local democracy.These prospects define the urgency of anew political/economic agenda forAmerica.

A NewPolitical/Economic Agenda

5.0) The alternative to both a failingcenter and a radical right political cam-paign in the United States is a programof new political/economic reform thataddresses the severe short- and long-term problems of American blue- andwhite-collar working people.

5.1) Economic conversion from acivilian to a military economy is a neces-sary key for enabling access to the vastresources allotted to the Pentagon: work-ing people (especially skilled), thePentagon's military machines whosevalue is about 50 percent of the worth ofU.S. industry, and an annual budget thatexceeds the sum of all U.S. industrialprofits. The military now spends $49 bil-lion annually for R&D; a transfer of $30billion of that, for a start, to civilian R&Dwould be an important conversion ele-ment.

THE ROADTO UNDERDEVELOPMENT

Production Worker Employment in Selected

Machinery-Producing Industries of the U.S., from

1977 to 1987. The following industries in SIC

group 35 showed the number of production work-

ers employed (in thousands).4~

Industry ___ 1977 1987 %Change

Machine Tools (Cutting)

Machine Tools (forming)

Machine Tool Accessories

Power-driven Handtools

Rolling Mill Machinery

Carburetors, Pistons,Rings, Valves

Turbines & TurbineGenerator Sets

InternalCombustion Engines

Farm Machinery& Equipment

Transformers(Except Electronic)

Motors & Generators

Electrical IndustrialApparatus, n.e.c.

Calculators andAccounting Equipment

Office Machines, n.e.c.

Ball & Roller Beahngs

Air & Gas Compressors

Blowers & Fans

Speed Changers,Drives & Gears

Construction Machinery

Mining Machinery

Oil & Gas Field Machinery

Textile Machinery

37.2

16.1

39.9

20.0

5.4

26.0

24.8

65.3

96.2

32.8

74.1

12.2

10.4

22.9

41.3

19.1

18.6

17.6

111.2

20.3

39.8

18.3

18.6

8.9

34.5

11.6

2.2

17.3

11.8

44.7

39.0

24.3

56.4

9.1

5.8

13.6

29.3

12.3

15.9

11.7

53.8

8.2

12.9

10.5

-50.0

-45.0

-14.0

-42.0

-60.0

-34.0

-43.0

-32.0

-60

-26.0

-24.0

-26

-45

-41

-30

-36

-15

-35

-42

-60

-68

-43

Source: U.S. Commerce Department, Census ofManufactures, 1987. Notes: Numbers for these industries are for twoyears of complete, not sampled, census data.Next complete census in*1992. Drop in produc-tion workers is paralleled by drop in number offactories in each industry and by an increase inimports. For machine tools, imports supply 50%of U.S. sales. These data show U.S. move toUnderdevelopment, the inability to produce themeans of production and the dependency onimports for basic industrial equipments.

5.2) A vigorous nationwide effort fordemilitarization and economic conver-sion would entail a reduction in military-based work but a net increase in civilianjobs. Consider "A Productive Way toSpend $165 Billion," back cover. If $165billion were transferred from the mili-tary to education, infrastructure, envi-ronment, housing, health care, civilianR&D, etc., 3.95 million (direct and indi-rect) military-based jobs would disap-pear but 5.11 million new civilian-basedjobs would be created — for a net gain of750,000 new U.S. jobs. (This increasewould be net of "normal" economicgrowth.) If the peace dividend recon-struction was funded by an additionalannual $80 billion from restoring 1980tax levels on the super rich, the furthernew employment creation would beabout 2.5 million jobs. Since the militarylabor force includes an unusually highdensity of engineers and scientists, theirconversion to civilian work would causea further economic multiplier effect.

5.3) Conversion planning requiresthree essential preparations. It must beordered by law, it must be done inadvance, and must be done locally ineach defense factory, laboratory and mil-itary base. The cornerstone of the com-prehensive conversion law proposed inthe Congress by Ted Weiss (D-NY) isthis provision: "There shall be estab-lished at every defense facility employ-ing at least 100 persons an AlternativeUse Committee composed of not lessthan eight members with equal represen-tation of the facility's management andlabor." The composition of such commit-tees insures that the members are com-mitted and knowledgeable. Thiscomposition gives weight to peoplewhose self-interest is tied to long-termproduction competence, as against short-term financial maneuvers that yieldquick profit but degrade the productioncompetence of an industry.

5.4) The professional judgment thatplanning must be done in advance isconfirmed by ordinary experience. Inindustry this involves selecting newproducts, estimating their market,retraining employees, altering the orga-

nization of production and redesigning plant facilities.Bases are convertible to industrial parks, schools, hospi-tals, airports, recreational facilities, etc. In military labora-tories, the scientific staffs must match their knowledgewith society's technological needs like renewable energyresources and preventing pollution. The firsthand knowl-edge possessed by defense establishment employees isessential for conversion. Thus, conversion must be donelocally; no remote central office can possess the necessaryknowledge of people, facilities and surroundings.

5.5) What can converted factories produce? Advanceddesigns of every sort of means of production and con-sumer goods: machine tools, electric locomotives, farmmachinery, oil field equipment and consumer electronics,etc. Modernizing infrastructure will require constructionmachinery and capital goods of many kinds.Electrification of U.S. railroads has been proposed as oneof the particularly desirable peace dividend projects (seeback cover). This task, costing over $100 billion, willrequire construction of entirely new industries for pro-ducing and maintaining equipment (from electric locomo-tives and rail cars to control equipment) that are not

currently being designed,developed or produced inthe United States.

5.6) The Weiss conver-sion bill includes a proposalthat the Federal Council(cabinet level) named tooversee conversion shall . . ."encourage the preparationof concrete plans for non-

defense-related public projects addressing vital areas ofnational concern (such as transportation, housing, educa-tion, health care, environmental protection, and renew-able energy resources) by the various civilian agencies ofthe government, as well as by state and local govern-ments." Thereby a highly decentralized, nationwide pro-cess could be set in motion for the realistic planning ofneeded work, and for job and money requirements forcities, counties, and states. All this entails a markedchange in the federal government's industrial policy —from favoring the war economy to favoring productive,life-serving investments of every sort. To acquire thecourage to break with their economic dependency on thePentagon, employees, their communities and Congressionalrepresentatives need blueprint-ready conversion plans thatdefine an economic future for their factories, bases and laborato-ries. Conversion studies for factories, laboratories, andallied worker retraining are proper enterprises costs.Federal funding is needed for regional development plan-ning for military base conversion; for converting the 90-odd major factories that aregovernment-owned/company-operated; for a 1990s G.I.

Bill of Rights; for retraining ex-Pentagon, CIA, NSA staffs;and for defense worker income support during actualconversion (as in the Weiss Bill). An annual levy of about2 percent on Pentagon purchases can accumulate neces-sary federal conversion funding.

5.7) Economic conversion also prepares the way fornegotiating international demilitarization — a course ofpolicy for improving security that is anathema not only tothe chiefs of the military industrial complex, but also tomany of their working people who have known nosources of livelihood other than the manufacture of mili-tarism. This extends from managers, engineers and pro-duction workers to the shopkeepers and others whosecash flow has had its origin in the Pentagon and myriadintelligence, research, trade, propaganda and universitybranches of the war-making institutions.

5.8) Managers in both private and state capitalismgive top priority to maintaining and enlarging their deci-sion power. Accordingly, government managers of mili-tary industry in the White House and the Pentagon aswell as the top managers in the private firms can only beexpected to resist economicconversion by all availablemeans. For economic con-version necessarily entails aloss of their decision power.No civilian industry candeliver the same power andprivilege as the militaryeconomy: profits areassured; goods are paid forbefore delivery; largerPentagon contractors are virtually guaranteed againstbusiness failure; firms often receive what amounts to a"blank check" from the government that covers escalatingcosts. Managerially-driven opposition to conversion plan-ning also comes from the president of the United Statesand his secretary of defense who are, functionally, thechief executive officer and president of the military indus-try empire, operating through the Pentagon's centraladministrative office. With a staff of 500,000 controlling"acquisition," it is the largest such entity in the world.

This analysis was confirmed by Stanley C. Pace, aschairman and chief executive officer of the GeneralDynamics Corporation — one of the largest defense con-tractors. In testimony before the U.S. Senate ArmedServices Committee on May 4, 1990, Pace identified thedistinctions between military and civilian firms:

(1) The culture of doing business in a defenseplant is significantly different from the culture ofdoing business in a commercial plant... They aredifferent because they are responding to differentrequirements and stimuli... In defense equipmentthere is an absolute necessity for superior combat

effectiveness. A less costly and less effectiveweapon system will provide defeat...

(2) A defense industry plant has a very difficulttime doing commercial work mixed with defensework. History is replete with examples of prob-lems and failures.

(3) Defense engineers and managers can suc-cessfully transfer from one culture to another, butit takes time and the individual has to leave hishistoric culture and move as an individual to thenew culture... [emphasis in original]Mr. Pace, like his senior colleagues at General

Dynamics, has opposed any effort to convert to civilianwork. They favor the Pentagon's policy called "adjust-ment." This means financial reorientation for the firm bynew investments elsewhere — anywhere — and leavesresponsibility for new jobs and skills to each individualthrough the mechanisms of the "free market." Like themanagers of many civilian industrial firms, military enter-prise top managers may be expected to abandon the func-tion of organizing work and instead elect personal futuresfunded by ample "golden parachutes" and retirementbenefits.

6.0) Job creation on alarge scale requires particu-lar institutional changes.Working people of allgrades, including many"middle managers," mustparticipate in competentproduction for the liveli-hood of themselves andtheir families. Top manage-

rial abandonment of work organization has left manyworkers with no options besides jobs at a fraction of for-mer pay or public welfare. That is why an increasingnumber of working people have sought out a new,extraordinary option — joint efforts by working people,unions and communities to buy out and operate enter-prises under their own control. Worker buyouts rangefrom steel factories to supermarkets.

6.1) Worker buyouts can be an option for economicconversion, especially in the factories that are governmentowned and company operated. The land and facilities ofmilitary bases are typically turned over to local communi-ty ownership after they are declared "surplus" by the mil-itary. Why can't control of government ownedmilitary-industrial facilities also be transferred to theirworking people and community to the benefit of all con-cerned?

6.2) The creation of new institutions to facilitate work-er ownership and control over production enterprises is ashort-term response to the departure of corporate and

government managers. But it is also a long-term invest-ment — creating economic and allied institutions thatcarry the promise of workplace democracy and produc-tive job creation as goals of enterprise.

6.3) These new institutions have the potential forreplacing conventional characteristics of capitalism: occu-pational separation of decision-making from producing;hierarchy in decision-making; and the relentless pursuitof more decision-power as a cardinal goal of manage-ment. While it is probably impossible to chart in advancethe many-faceted development of workplace democracy,it is possible to define near-term effects. These include:joining decision-making with producing; deflating admin-istrative hierarchy; productive job creation as a goal inplace of profit/power maximizing.

6.4) Financing institutions are needed — a decentral-ized network, state by state and region by region — thatserve both as sources of capital and as innovative design-ers and monitors of new and rebuilt enterprises. Thesecan be banks, credit unions, loan guarantee agencies,coalitions of pension funds, with staffs that are competentto oversee both the planningof an enterprise and themonitoring of its continuousfunctioning. The same insti-tutions can help to educateworking people in the "mys-teries" of enterprise admin-istration, a furthercontribution toward work-place democracy.

6.5) In order to deploy public funds to jump-start andpropel new productive investment, it is essential to con-front the problem of public debt. The present $4 trillionfederal debt, growing at $400 billion yearly, has been aprimary result of military expansion combined with rev-enue reduction from a tax abatement for the super rich.But even with military budget cuts and a tax restorationfor the super rich there will still be an annual deficit forsome years. How should this deficit be understood? Debtin individual enterprise is justified if it finances newinvestment which generates at least enough income(return) to pay off that debt. Similarly, as federal fundsare shifted to civilian/productive tasks, those expendi-tures can be seen as investments since new wealth is cre-ated: houses, hospitals, railroads, schools, clean water,factories, clean and renewable energy technologies, etc.All such goods are investments whose use enriches thecommunity, making its people more productive andthereby yielding a rich return to the investing governmentin the form of tax revenues. But there are few such resultsfrom military products, which exit from the marketplaceimmediately upon being produced, consuming resources

without giving consumption or further production usevalue. Thus, deficits to pay for productive investment areboth bearable and desirable, while deficits on behalf of themilitary only weaken the economy.

A Lesson for Americans: Weimar II ?7.0) The Weimar Republic of Germany was the site of

a prolonged depression from the close of World War Iuntil 1933, when the Nazis (National Socialist GermanWorkers Party) took power by nomination from PresidentHindenburg. The Nazis lost no time in declaring the pre-vious constitution and laws null and void and proceededto install a totalitarian military form of state capitalism.The ascendancy of Hitler's party followed the unwilling-ness/inability of the governing Social Democratic party tomake strong use of government to spur economy,employment and income, and to form an alternative left-of-center grouping and policy. This failure of the SocialDemocrats opened the way for political mobilization fromthe right.

7.1) The Nazis appealed to the disaffected blue- andwhite-collar workers with a combination of "national"

and "socialist" appeals. Thenationalist appeal was basedon ascribing a large part ofGermany's economic trou-bles to the defeat in WorldWar I and the penalties interritory and wealth appliedby the Treaty of Versailles.The "socialist" part of theappeal included condemna-tion of the exploitation of

German workers and emphasis on "Jewish internationalbankers" as a prime source of Germany's woes. Anti-Semitism was organized and pursued by violent methodsas a way of fulfilling both the "national" and "socialist"aspects of Hitler's appeal.

7.2) But there was another side to the success of theNazis in capturing popular attention. The vigorous cam-paign from the right in response to Germany's long anddeep economic depression, strongly supported byGerman industrial managers, was bolstered by the failureof the socialist and communist parties to formulate andimplement a radical program of reform necessary toaddress Germany's economic collapse. The SocialDemocratic party of Germany had over a million mem-bers, based upon a trade union membership of five mil-lion. At the same time the German Communist party atthe end of 1932 had about 350,000 people enrolled. Boththese political parties published scores of daily newspa-pers and other media, and operated large networks oftrade union, community and local government institu-tions. In the parliamentary elections prior to November

12, 1933, the combined Communist-Social Democraticvote exceeded that of the Nazis by nearly 1.5 million. Butthese parties of the German left-of-center were incapableof combining their considerable forces. This eased theway for Adolf Hitler's nomination to office by the presi-dent of Germany, General Hindenburg.

7.3) The failure of the German left grew out of twomajor conditions: first, the timidity of the SocialDemocratic party; second, the Communist party policy of"social fascism" which designated the Social Democrats,not the Nazis, as the main enemy. "Nach Hitler kommenwir" (after Hitler — our turn) was a Communist motto.The victory of the Nazis would hasten their ascendancy topower since the Nazis would "increase the misery" of thepopulation who would then turn to the Communists. Thisremarkable formulation was controlled from Moscow andwas a part of Stalin's policy of discouraging the politicalvictory of a West European working class, whose econo-my would automatically overshadow the political econo-my of the Soviet Union.

I recount this outline of German events because theirmain lesson should not be lost on Americans. The result ofaggressive, well funded organi-zation on the right, coupledwith failure and catastrophicdivision in policy and organi-zation on the left, opened aclear field for Hitler's party.

Politics of a NewPolitical/Economic

Program8.0) A new political/eco-

nomic agenda must address the full scope of damagedone to industry, infrastructure and quality of life by thelong-enduring military state capitalism under federalgovernment management. Accordingly, the major transi-tional components of this alternative policy must begrounded on demilitarization and economic conversionpolicies. These means alone have the potential for makingavailable fresh resources on the scale required for creatingmillions of new jobs and repairing the major Americanhuman and physical decay. But a new political/economicagenda also requires a long-term policy to address themanagerial system that has come to feature a growinginability and unwillingness to organize work.

8.1) For the longer term it is crucial to set in motion asustained effort to encourage every sort of institution tocreate jobs and organize work based on non-managerial,cooperative, democratic forms of decision-making.Managers in private firms and in government haveinvented ways of continuing their money making andpower extension, even as they curtail economically andsocially useful work. Only the working people of all occu-

pations require sustained conduct of productive work,because that activity is indispensable for their lives.

8.2) These political/economic characteristics form aframework of requirements for political organizing ofevery sort, both toward the 1992 election and after.

9.0) During the long Cold War many Americans gaveup hope for major change in the national politics of theUnited States. In place of concerted political effort, specialpurpose organizations were developed. These focused onparticular issues: trade unions and working people; equalrights for women, African Americans, Native Americans,Hispanics; problems of the environment; health care;ethics in government; nuclear weapons; the condition ofchildren; reproductive rights for women; education; carefor the elderly, etc. From time to time temporary coali-tions were formed, when particular issues seemed todominate the national landscape and impelled unifiedaction by combined groupings of the American left-of-center. However, these coalitions never gave sustainedattention to the core characteristics of America's military

state capitalism.

9.1) Following WorldWar II, reform againstracism and gender discrimi-nations and toward greaterequality in opportunity andincome seemed feasible.That perspective has beenmarkedly altered. As corpo-rate and government man-

agers have sponsored deindustrialization, job reductionand a permanent war economy, the meaning of equalopportunity, for example, has been transformed. It hascome to mean more equal sharing of less new wealth(such as housing), more equal sharing of decaying infras-tructure, more equal sharing of a polluted environment,of less medical facilities, of less competent education, etc.When economic losses are suspected as the likely accom-paniments of diminished racism and gender discrimina-tion, then resistance to equalizing reforms is heightened.The holders of good jobs strive to reserve them for them-selves and their kin, and resist claims for non-discrimina-tory entry. That is why it is necessary to address theunderlying economic conditions that help engenderracism and other inequalities.

9.2) Within a framework of demilitarization andample funding for economic development, issues likeracism can take on a new aspect. Improvement for disad-vantaged African Americans and others in education,jobs, homes, etc., does not constitute or ensure an end toracism. The cultural, social-psychological, historical and

other components of racism are not like stains that maybe quickly or easily erased. Racism is too multi-faceted,too ancient, too well regarded and openly practiced bythe most prestigious Americans (such as presidents) to besusceptible to wipe-out by either command or formalagreement. But serious economic improvement wouldmake a major difference in the life circumstances, expec-tations and achievements particularly of disadvantagedyoung minorities. Such improvement, especially as a partof economic development for all working people, con-tains both economic gain in its own right as well as abuilt-in counter-racist message. Occupation and earningshave powerful formative effects on most other aspects oflife. It is thus reasonable to expect that economicimprovement will yield improvement in race relations aswell.

9.3) Growing incompetence in production and continuedpriority to the military-industrial complex checkmate prospectsfor serious improvement — issue by issue — in the range ofreform subjects that have captured the commitment of manyAmericans during the last 45 years. If there is to be a compe-tent new policy response to the political/economic crisesof American society, thenthe participants in diversereform movements willhave to seek and identifytheir common ground andprepare to act in a unifiedmanner. That is the impor-tance of the transitional andlong term policy recommen-dations for economic con-version, demilitarizationand worker control of productive enterprise. Success inthese matters provides the means for — and is the neces-sary condition for — all the rest. *

Sources for Back Cover ChartEstimates by the National Commission for Economic Conversionand Disarmament based upon published reports of various expertstudies identified in NY Times. 10/18/87, 3/23/88, 9/27/88,10/13/88, 12/3/88, 1/6/89, 3/10/89, 3/29/89; cost estimate of elec-trification of US rail system prepared by Professor John E.Ullmann (Hofstra); Michael Renner, "Enhancing Global Security,"in State of The World: 1989, (Norton,1989); US Congress, JointEconomic Committee, Hard Choices, Feb. 25, 1984, Wash., DC,1989; A. Bastian, N. Fruchter, C. Green, "ReconstructingEducation," in M. Raskin, C. Hartman, eds., Winning America,(Boston: South End Press, 1988), pp. 11, 197, 204; Center onBudget and Policy Priorities, "The Bush Budget,"2/17/89, p. 10.

More Information• NATIONAL COMMISSION FOR

ECONOMIC CONVERSION AND DISARMAMENTECD was established in 1988 to educate the public about why theorderly transfer of military resources to civilian uses throughconversion is necessary for reversing the arms race and restoringthe nation's economic health. The New Economy pioneers howdefense cuts can be invested in infrastructure, civilian R&D andother productivity-enhancing investments which will create newjobs and promote sustanable economic growth. Write:1801 18th St. NW, Ste. #9, Wash., DC 20009 Tele: (202) 462-0091

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