February 07, 2006

Wartime Socialism

In the grander scheme of things, it probably isn't the soundest of decisions to boost defense spending up to even more obscene levels, as the president proposed in his 2007 budget yesterday. But then, who knows, maybe the economy needs it. Last week, the Economic Policy Institute put out one of those "ironic in an Alanis Morissette sort of way" reports estimating that between FY2001 and FY2005, defense spending created 1.5 million additional private sector jobs in the United States. Some might call it pork. Some might call it socialism. Either way, it's hardly anything new in this country.

Disney, which seems to be grabbing all the headlines these days, is one of my favorite socialist success stories over the past fifty years. Walt Disney, as the tale goes, revolutionized the animation business by creating a Ford-style production line in the 1930s, with animators confined to mundane, repetitive tasks in order to churn out all those cartoons so quickly. In the 1940s, the animators went on strike over their dismal working conditions, and Disney—who had little in common with his father, a passionate socialist—fought back: hiring scabs, using private guards to attack the picketers, bringing in a mobster to negotiate a deal, and eventually, long after he had lost the union battle, became embittered and served as an informer for the FBI against uncouth Communists in Hollywood during the McCarthy era.

Quite the free marketeer, that one. Or at least he was until his company started flailing in the 1940s and Disney had to rely on the government dole, mostly in the form of defense contracts, to keep his business afloat—at one point, federal funds paid for nearly 90 percent of his studio's work. The company made propaganda, military training films, and airplane nose art for the Department of War, and later worked with postwar administrations to provide further government agitprop promoting American technology, space travel, and nuclear technology. ("That included the 1958 classic, "Our Friend the Atom," teaching kids in the classroom to "duck… and cover" in the event of a nuclear attack.)

At any rate, Disney's story is hardly unique—all sorts of modern corporations got where they were because of military socialism, especially the automobile and oil industries. As EPI showed, the American economy is addicted to it: since 2001 a little under half of the 3.4 million new jobs created have been paid for by the Pentagon (and another 1.3 million have been created by non-defense discretionary spending; more socialism!). It's not a huge surprise that the Pentagon's latest Quadrennial Defense Review called for virtually no major cuts in spending, or that members of Congress routinely ignores calls to close bases or kill weapons programs. Where else will the jobs come from?

In economics, the usual Keynesian line is that pretty much any sort of government spending can help pump-prime the economy. But that doesn't distinguish between different types of spending. After World War II, a variety of American policymakers worried about sinking into another depression, and believed that only wartime socialism—and not Roosevelt's domestic programs—had saved the American economy previously. "One of the first things we must realize is that in the 1930s we never did find the answer to full employment," said New Dealer Chester Bowles. "Only the defense program in 1940 put our people to work, and only the war and the cold war that followed have kept them at work."

Since 1950, when in the Korean War caused the federal tax burden to leap from 14.4 percent (and falling) up to 19 percent in just under two years—and then remain at that level for most of the Cold War—policymakers seem to be thinking like Bowles, regardless of whether he was right or not. (Certainly some economists deny that the defense program "put our people to work:" for a right-wing view that the domestic economy in the 1940s wasn't quite as prosperous as the history books remember, see Robert Higgs' "Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s.")

One contrary view came from the late Seymour Melman, an economist and ardent pacifist, who wrote in 1974 in his book, The Permanent War Economy, that military spending had a negative effect on the economy in the long run, by diverting research and development away from more productive and wholesome purposes other than war. Certainly military spending has led to some marvelous innovations—the internet, whose precursor was built by the Defense Advanced Research Project Agency, is one—but compared to what? Military research dollars surely aren't the only way we can invent fancy computers.

And the other question is whether even more jobs could be created if some of those Pentagon dollars were shifted to direct spending on housing and infrastructure. That seems quite likely, and this was Melman's view—as for instance, he argued in a 2003 Counterpunch essay. If we're going to have a socialist system here in America—and already we have a Federal Reserve Chairman who perhaps exercises as much control over the U.S. economy as GOSPLAN ever did in the Soviet Union—we may as well do it right. The other upside is that not building all those fancy weapons will give us even less excuse to use them. And then there's the fact that, regardless of the benefits of military socialism, we can't keep paying for all this empire with piles of debt forever...
-- Brad Plumer 2:10 PM || ||