Sunday, August 12, 2007

The condition we're in


At least part of the reason we can't keep the bridges in good repair is that we have lived on a war footing since the beginning of the Cold War.

No, Spotty, that's not true. Peace has broken out several times during this period.

Perhaps grasshopper, but from an economic standpoint we have not acted as though that was the case. By the way, do you know the definition of peace?

People and nations getting along without fighting?

"Peace is a period of lying and stealing between two periods of war." Kidding, although not entirely.

 We really didn't get the knack of this war footing stuff, however, until Jack Kennedy appointed one of the best and the brightest, Robert McNamara, as the Secretary of Defense. A former Ford top executive (he was a little ahead of the Pinto era, but not much), McNamara came in, dragging his industrial methods behind him, convinced that he could rationalize and improve defense spending. He set about doing that as the Vietnam war ramped up.

One of Bob's big ideas was that we could have more and niftier military research and development if we just had more units produced over which to amortize that R&D. But even a big, powerful country like the US can only absorb so much military hardware. Sad, but true. What to do? "I know," says Bob, "we'll export the bejesus out of our hardware and drive that unit cost down. And that's what Bob did.

Other countries, especially the perfidious French, also had the same idea. It must have been a really good idea! Our friend JRS says:

Our reliance upon military economics began as a conscious attempt by technocrats to treat the burden of military expense in the same way that we treat any commercial economic problem — that is, in terms of profit and loss. This approach, they felt, would also strengthen our foreign policies and reinforce our national independence.

But the central theme was economic. Modern weaponry, they argued, was too expensive to be viably produced for the needs of a single nation. It followed that we had to produce more and sell the surplus abroad. As General Michel Fourquet wrote, when head of French military sales, we must "admit as the basic rule that its industries can only live by exporting."

Of course, it may not have occurred to Bob that in the long run there would be so many countries with defense industries out there seeking to export their own arms that it would not only not be a zero sum game, but the everyone was going to wind up losers, both in economic and non-economic (dare we say real?) terms. At first it was mostly the Western powers and the Soviet Union, each selling to its own former colonial or "client" states. But it wasn't long, especially after the breakup of the Soviet Union that several so-called "emerging states in Central Europe and, say, Brazil, in South America got into the game, too.

As the game progressed and competition increased, it became more and more important for governments to support their native defense industries through export assistance programs: generous loan terms and "foreign aid." It is not uncommon, for example, for a US weapons supplier to secure an export contract and the government ends up financing the deal on concessionary terms or giving the money to the foreign government to "pay" for the weapons, or some combination of both. In other words, the government is really the buyer and maybe the maker of bad loans. On the books, the weapons manufacturer who makes the sale looks good, but from a national accounting and wealth accumulation standpoint, it isn't nearly as desirable.

The trade deficit numbers that you see reported, boys and girls, would be even worse if we owned up to the fact that the weapons export funny business didn't really earn as much in foreign exchange as the dollar values that are reported suggest.

It is not unlike the governors throwing money around to try to attract "bidness," or even a sports team. Well, okay, it's not exactly like that, but you get the idea, boys and girls.

On the "non-economic" side, we have the fact that we're helping create a world awash with arms; we constrain our foreign policy decision making, and we're giving away the family jewels. The first item in the list is self-explanatory. In the case of foreign policy decision making, when weapons are marketed, there is pressure by the manufacturers to get approval of the export sales; this pressure is economic, not political. The initial sale also creates a market for spare parts, which the manufacturers are loath not to supply, for fear of appearing to be an unreliable supplier, again creating economic pressure for the government to approve something that might have contradictory foreign policy considerations.

With respect to the family jewels, it is obvious that putting military technology into the hands of potential adversaries and their friends is dangerous. Shipment diversions, falsification of end-user certificates and the like happen frequently. Iran-Contra was a weapons diversion escapade run by the Reagan administration.

Here's what JRS has to say:

Weapons cannot be transformed into banal economic material because they are not banal economic material. The defence of a nation is one of the few sacred duties of a society, along with such things as the maintenance of justice. You do not sell justice. You do not sell legislative seats. You do not sell off the presidency or the prime ministership. You do not sell officers' commissions. You do not sell the interests of your country. All of these things are basic to the modern democratic state. It goes without saying, therefore, that you do not sell your own defence.

Weapons are an integral part of a nation's defence. Every important strategist from Sun Tzu on makes clear that the best defence is the avoidance of war through superior leadership. Failing that, it is the fighting of a fast war with as little physical damage as possible. The wise nation or alliance, therefore, keeps its weapons to itself in order to maintain whatever advantages they may offer. It refrains absolutely from arming anyone else.

See, boys and girls, he even spells like a Canuck.

Well, this is all very interesting, Spotty, but what does it have to do with infrastructure?

Isn't it obvious? The United States spends more on military R&D than any other kind, and it spends more on the military than the rest of the world combined. (Spot doesn't have links immediately available for those to assertions, but Spot is on a dial-up for a couple of days and it's hard to get links; anyway they are both figures in common discussion and are non-controversial)

But doesn't the military R&D filter down to civilian applications?

You mean "aren't our tractors much better because we have the Abrams tank?" Maybe so, grasshopper, but it's a damn inefficient way to fund civilian R&D. You've posed a trickle down theory, grasshopper, which is about as helpful as the trickle down tax voodoo that the Republicans have sold.

One last quote from JRS:

If part of the responsibility for our economic confusion lies with the weapons industry, is the reason perhaps that arms are not capital goods? They cannot act as an economic motor to drive a fully rounded economy if there are no real costs, no real buyers, and no real return on investment in the form of civil infrastructure. As for singing the praises of the trickle-down effect, this borders on the ridiculous. Why should we tie our industrial investment and development to a method which is both inefficient and reliant upon luck? It is a sign of how flawed the rational system is that we have accepted with docility an economic development strategy which by comparison makes a roll of the dice on the tables of Monte Carlo look like a sure thing. Nevertheless, this system has taken on the form of a squirrel cage. And no one seems to remember how we got in or know how to get us out.

In other words, the modern weapons industry creates swords that can't even be beaten into plowshares.

There is talk now of expanding the size of the military. Apparently enough so that we could get into two disastrous wars at the same time! Or maybe three! Spot says not to look for any substantial bridge building anytime soon.

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