The peace dividend
Levinson, Mark
As the cold war winds down questions arise: How much should the defense budget be cut, and what should be done with the money freed? What will be the effect of such cuts on an economy in which...
...But an expansionary policy is not directed at specific industries or geographic areas...
...Which brings us to the politics and economics of cutting defense spending...
...As I am not prepared to accept the romantic glamour attached to entrepreneurship in the United States, I view the much celebrated move to the market in the Soviet Union with some reserve...
...As to why this is true I refer the reader to their book and a cogent essay by Jeff Faux in Dissent (Winter 1990...
...Defense Secretary Cheney has asked the three services to suggest how they might change their spending plans if they were forced to cut 5 percent in each of the next five years...
...In his letter, he requested these members of Congress to respond with a specific list of military programs in their own districts that they believed should be eliminated...
...so is sugar...
...No American politician would dream of allowing agriculture to go back to the market by voting to remove the tens of billions in annual income-support subsidies...
...With the advent of perestroika, both economic systems now embrace the rhetoric of the market and the entrepreneur...
...They seem more willing to close down the inefficient Gdansk shipyard, where Solidarity was born, than we are to lift the coastal monopoly we give to our inefficient shipping industry...
...Because it is doubtful that this administration will support planning for conversion, the attempt to solve one problem (excessive defense SPRING • 1990 • 141 Comments and Opinions spending) will likely create another (unemployment...
...Louis (aerospace), and Boston-Cambridge (military electronics...
...Perhaps the Poles, to take one case from the Eastern Bloc, may be willing to make more radical concessions to capitalism than we are...
...But perhaps our security is no longer to be measured by the size of the military budget...
...To use the money from defense cutbacks to reduce the deficit would be wasteful and dangerous...
...Such pockets include Dallas–Fort Worth (military electronics and aerospace), Los Angeles (aerospace), Groton–New London area in Connecticut (military shipbuilding), Seattle (aerospace), St...
...One hopes that some of the massive ministries will be broken up and that their industries will be made subject to market tests...
...Market control is implicit in this concentration...
...Our auto industry is similarly protected...
...He received no replies...
...142 • DISSENT...
...If it were America's number one problem, we would be very well off indeed...
...In the 1980s, while military spending doubled, high interest rates drastically reduced civilian manufacturing...
...By contrast, two exPentagon officials at the Brookings Institution have published a plan to reduce the military budget by half over a ten-year period...
...The wholly uninhibited and self-sufficing capitalist entrepreneur and the sacrament of central planning are, each in its own way, destined for that famed dustbin of historical obsolescence...
...Realists" will be quick to point out that billions of dollars cannot be immediately transferred to the civilian sector because much of next year's defense budget is already locked in (bills due from previous commitments) and, furthermore, that whatever money is available must be used to reduce the federal deficit...
...Neither of these objections is convincing...
...According to the Department of Labor, Pentagon outlays in 1976 generated only 1.9 million jobs in the private sector—compared with 3.1 million today...
...An enormous amount of effective market control—control comparable in a lesser way to that of the great Soviet ministries—rests with the largest U.S...
...No wonder President Bush said there will be no "peace dividend...
...The air force predicted that it would close fifteen bases, eliminate five fighter wings, stop buying F-16 fighters, retire Minuteman 2 missiles and B-52 bombers, and slow down its rate of purchases of Stealth bombers...
...Increasing government spending in nonmilitary areas and cutting interest rates would stimulate the economy and work against rising unemployment...
...On the deficit: at the end of their recent book (The Debt and the Deficit: False Alarms/Real Possibilities), Robert Heilbroner and Peter Bernstein state, "By no stretch of the imagination can 'reducing the deficit' be considered as America's number one problem...
...The navy warned of a hundred fewer ships and two fewer carrier battle groups by 1994...
...steel industry with another five years of protective quotas...
...These failings will not be repaired unless we dramatically increase the size of the public sector...
...Only large organizations can fulfill the tasks of production...
...The outcome was a seemingly large $180 billion cut...
...If many of these workers lose jobs because of military cutbacks, their loss of income will lead to a cutback in their consumer spending that in turn will generate further layoffs in industries supplying consumer goods...
...In fact, this proposal would maintain military spending at about the current level because the decline in spending rep140 • DISSENT Comments and Opinions resents a lowering of future growth in the defense budget...
...we haven't turned the core of our economy over to the free market...
...What must or can happen to convince such people that military spending should decline...
...Cutting government spending when the economy is weak, as it now is, might result in a recession...
...What Free Market...
...The basic, terrible truth is that if any system is going to make steel, automobiles, chemicals or pharmaceuticals, it will be done on a large scale...
...If military spending is reduced—even with money transferred to the public sector—the only way to avoid recessions in these areas is to plan to convert military-oriented facilities and work forces to civilian production...
...Perestroika Americanstyle is off limits when it comes to wheat or milk...
...Military industry and bases are gathered in tightly concentrated pockets in every region of the nation...
...In California, the headquarters of the free-market entrepreneur, the growers—the gosplanners of California's largest industry, agriculture— meet, under government sponsorship, to control, through market boards, the sale of their major produce...
...The military, wary even of Cheney's proposal, hinted that national security might be threatened...
...We haven't done so in the United States...
...JOHN KENNETH GALBRAITH Reprinted, with permission, from New Perspectives Quarterly...
...What will be the effect of such cuts on an economy in which the share of manufacturing devoted to the military increased significantly in the 1980s...
...Only recently have we provided the U.S...
...In fact it demonstrates how conservative policy, that is, an aversion to planning and a simplistic reliance on markets, produces conservative results...
...Our oratory celebrates the market, except in those wonderful cases where the market imposes hardships that nobody wants to suffer...
...During the Reagan administration the military budget doubled while programs serving the low-income population were cut by 40 percent (after adjusting for inflation, by 54 percent...
...The Bush administration has taken a position that appears to be in the middle...
...Both we and Mikhail Gorbachev have our imagery...
...The thousand largest corporations do a full two-thirds of all industrial business...
...The question is not how much can we cut the military budget next year but, rather, what are our social priorities for the next decade...
...But I don't think for a moment that Gorbachev or anyone else is going to turn the hard core of Soviet industry over to the free, unregulated market...
...This is what passes for sophisticated politics today—provide the illusion of change while maintaining the status quo...
...If this kind of shift could take place in less than a decade, there is no reason why a shift in the other direction should take any longer...
...Simply cutting back on military expenditures would create considerable economic distress in an economy as militarily oriented as the United States...
...The political problem was dramatically illustrated several years ago when then Senator Tower, chair of the Senate Armed Services Committee, sent a letter to members of Congress who had been talking about the need for cutbacks in military expenditures...
...So, I venture, it will be in Russia...
...And if the great firm mismanages on a large enough scale, the government intervenes to ensure "market and employment stability...
...This is compounded by the fact that during the Reagan years American manufacturing has become increasingly militarized...
...The army claimed it would have to lay off 200,000 people...
...As a result, the defense share of output increased significantly in many manufacturing industries...
...One step would be to transfer money from the military to the civilian sector...
...Modern industrial development requires the combined efforts of many different talents and specializations and much differing experience...
...One view is that of the conservative economist Herbert Stein, of the American Enterprise Institute, who argues against cuts in defense programs "until the size, durability and significance of the changes in Europe are clearer than they are now...
...A fringe of small, innovative firms that operate under the classical market rules will, of course, continue to exist in the United States, but the solid core is still going to be General Motors, USX, Johnson & Johnson, and IBM...
...So, in one way or another, it will be in the Soviet Union...
...As with ours, it may well be that much of the Soviet rhetoric is more enthusiastic than real...
...Conservatives will solemnly explain that this is an example of how unintended consequences often overwhelm the best-intentioned attempts at social reform...
...It may be that our country's greatest weakness lies in the public realm—the shocking economic inequality, urban centers that resemble underdeveloped countries, rotting roads and bridges, second-rate education and training, shameful neglect of the young...
...we both are subject to controlling circumstance...
...In 1988 alone, if the defense share of the budget had stayed at the 1981 level, there would have been $40 billion available for human needs and improvement in public works...
...something resembling a market may develop in light consumer goods, clothing styles and in services like auto repair...
...firms...
...Similarly, lower purchases by the military-industrial firms will generate multiplier effects that will add to unemployment...
Vol. 37 • April 1990 • No. 2
