6. The Flowering of Armaments
We are living in the midst of a permanent wartime economy. The most important capital good produced in the West today is weaponry. The most important sector in international trade is not oil or automobiles or airplanes. It is armaments.
Many people imagine that this rearmament process was limited in time and place to the United States and to the eight years of the Reagan administration. In fact it began twenty years earlier and was a, generalized phenomenon. What's more, nothing in the current moves towards detente and demilitarization indicates that this will change. No production cutbacks or economic reorientations are even being considered which would have more than a token effect on the system.
By any standards -- historic, economic, moral, or simply practical -- in a healthy economy arms would not occupy first place unless that society were at war. Even then, such prominence would be viewed as an aberration to be put up with no longer than events required.
This explosion in armaments production provides the perfect demonstration of how the rational system works. These enormous industries are the result of conscious policies. They have involved prolonged c0operation between most of the key modern elites -- politicians, bureaucrats, corporate managers, staff officers, scientists and economists. The creation of this arms-oriented economy 'has been perhaps the happiest moment in the life of the rational system. There has been a purity, a structural malleability, a cool, abstract intelligence about the whole thing which are unmuddied by the realities of uncontrollable populations and unpredictable economies.
It is precisely this abstraction which has made it impossible for the citizen to get a handle on the situation. Living as we do in a civilization that wallows in information, statistics mean nothing. They become the commas and semicolons of everyday speech. Since they are mostly used by technocrats to decorate their self-fulfilling arguments, the citizen has developed an unconscious defence. He shuts off his value-weighing perceptions the moment he hears a number. In such a situation; intellectual resistance is virtually impossible. Deafness is therefore a healthy reaction. Unfortunately, the discounting of all statistics means that even those capable of conveying a relative truth are lost.
For example, to say that annual international and national arms sales are worth some $900 billion has absolutely no impact. [1] First, the figure is obviously inaccurate. Accuracy at such levels is impossible. It does, however, offer an approximation. It indicates that arms sales are large, enormous, unimaginably big.
In fact, nobody, whether citizen or banker or minister, has any concrete idea of what $900 billion means. Money itself is an abstract idea. People are capable of imagining what small amounts might mean by simply comparing the figures to concrete equivalents. Some can imagine the real impact of far-higher numbers than other people can. Men in charge of large industrial concerns might be able to imagine accurately hundreds of millions of dollars. However, somewhere in the high hundreds of millions the phenomenon of understandable quantity ceases to exist.
Even Robert McNamara, who invented financial control systems for the car industry, the Defense Department and for Third World development, was unable to produce any method that could control the practical application of such figures. While in charge, he himself lost complete control of both defence and development finances. This is not to say that someone else might have done better. No banker or economist who worked on the creation of these systems was able to control their budgets. Cost overruns became, and continue to be, an inevitability whenever the figures rise above the levels of concrete imagination. However technically strict the budget control systems, everyone from the citizen to the controller has come to accept, on some unspoken level, that financial controls do not work.
The problem involved is not unlike imagining a physical exploit. Almost everyone can imagine what it is like to jump over a bar raised 1 meter high, because almost everyone has done it. Many of us can, imagine how we might jump 2.43 meters, which is the current world record, had fate only given us such things as longer legs and better muscles. We can even imagine jumping another meter or so higher. But 10 meters is not aft imaginable jump. It belongs to the world of comic books.
The American annual overall defence budget alone is more than $300 billion. What do all the world's defence budgets add up to? How many thousand billion? And even that figure would not include the defence-oriented or defence-reliant or defence-subsidized sectors of our economies. All estimates of military influence upon our industries are too low because the military programs are so deeply integrated into theoretically civil sectors that they cannot be separated out for honest calculation. In Sweden, for example, where fairly serious attempts are made to understand the phenomenon, it is felt that civil products with military applications are worth as much as purely military goods. We could, therefore, plausibly take the figures for national arms production around the world and simply double them. Needless to say, we have no idea what the immediate financial or structural effect would be if all of this direct and indirect Investment were removed, How many apparently unrelated programs or industries would suffer or abruptly collapse?
It should be remembered that while education, social services and highway construction together add up to less than 15 percent of the 1988 U.S. federal budget, defence's $312 billion represents 33 percent. Moreover, it is generally estimated that one-quarter of the U. S. gross domestic product (GOP) is militarily oriented.
Given the thirty-year-old French government policy of protecting and developing defence industries, the military-dependent percentage of their GOP is probably even higher. This integrated strategy has been aimed at creating an alternative to American weaponry, while using military investment to finance French civil high technology. What's more, they export 40 percent of their military production. This doesn't make them an exception among nations. Britain exports 33 percent. Looked at another way, more than half the capital goods exported by France are armaments. [2]
But even these official figures are too low. Many sales of arms or of parts are kept secret for security reasons. They appear in no statistics. And no prices attached to arms sales could be called "hard" prices. They are disguised by heavy subsidies and artificial inflations or deflations which are determined by a multitude of trade-offs justified by everything from foreign policy and international commerce considerations to local employment and national security.
A classic example during the sixties and seventies was the pricing of the Mirage fighter -- one of the most successful fighters ever built, if judged by the quantity sold. Among its attractions was a ridiculously low price. This was the result of endlessly variable calculations, which could include such factors as the deduction of the price of the jet engines. The French government would buy the engines from the builder, SNECMA, a state corporation, at a generous price, which was not made public and which provided the company with healthy books. The government would then sell the engines to the theoretically private airplane manufacturer Dassault at any price that was felt appropriate to win foreign sales. Again, the price would not be made public. As a result Dassault could go into a specific international negotiation with a bewildering margin for manoeuvre. If selling the plane to a nation suited French foreign policy, Dassault could undercut any competitor.
What, then, was the real cost of the Mirage? What percentage of the GDP did it really represent? Did the company -- SNECMA or Dassault -- really make a profit on the sale? If in the annual calculations of French arms production, foreign sales, trade balance, inflation figures, productivity levels, and so on, a jet engine was priced at a hidden figure of one hundred francs, were any of those calculations accurate? Where are the dividing lines between foreign aid, foreign military aid, employment policies and industrial development? And even if you could answer all those questions, you would still not have dealt with the indirect question of the real price of a jet sold to a poor African country that produces uranium, the supply of which you want to control in order to feed your civil and military nuclear industry. France, after all, produces no uranium, but has the world's third largest nuclear arsenal, as well as using nuclear power plants to satisfy more than 50 percent of its energy needs.
American figures are as soft as the French but are arrived at in different ways. The Pentagon, for example, has a special program for the distribution of "surplus" weapons to allies, mainly in the Third World, which could not otherwise afford sophisticated attack helicopters. Only the minor costs of "refurbishing" and shipping these weapons actually show up in official calculations.
Forty percent of all U. S. scientists are employed on defence-related projects. Shortly before the end of the Soviet Union, NATO said that the Soviet figure continued to be 75 percent of all scientists, and that 40 percent of Soviet industry was given over to military production. A1987 Congressional Research Service report placed the Soviet Union first in weapon supplies to Third World countries ($60 billion from 1983 to 1986). SIPRI, the Swedish independent research institute, agreed with this. In the wake of the growing Soviet crisis, there is general agreement that the United States is now in first place. SIPRI puts the Soviets second, after the United States, in overall arms sales. [3] Washington maintains that SIPRI is an unfriendly source. At such levels the order isn't of great importance and the new official figures coming out of Moscow are probably about as accurate as Western figures on our own production.
Many experts think the real figures for arms sales are two, three, even four times higher .than the $900 billion arrived at by adding up available statistics. There isn't much point in attempting to digest or understand such numbers. Their very unimaginability should be taken as a general summary of the state of affairs. We have maintained, and despite all economic difficulties continue to maintain, historic highs for military spending in a world technically at peace.
The cutbacks initiated by Gorbachev and Reagan captured the world's imagination. Certainly they were a good thing. Certainly they were moves in the right direction. But the truth is that they were peanuts on the mountain of military equipment and expenditure. The good news was so minor that its historical significance rivaled that of the Kellogg- Briand Pact. As for the current manic joy over military budget cutbacks around the globe. it should be noted that only the annual growth levels are being reduced. The budgets themselves remain at their historic highs. Even if cut by a staggering amount -- say 25 percent -- they would still be way above historic wartime levels. However, they will not be severely cut. The results of the Gulf War will include a general rearming in the Islamic world and a reevaluation of weaponry in both the West and the splintered Soviet Union. That reevaluation will lead to the highly publicized retiring of some older weapons systems, both nuclear and conventionl. But it will also result in a wave of high-tech military modernization. The shattering of the twinned superpower status quo has created yet more optimism about serious cuts in arms production. However, it has also brought about an uncontrollable explosion in nationalism, which -- accompanied by unsatisfied racial rivalries -- is constantly fracturing nations into ever smaller units. This will probably produce an expanding, not a shrinking, weapons market.
Perhaps the unimaginable size of all this commerce and production explains why the politicians, the press and the public apply their moral indignation to flea-size military scandals which they can concretely imagine. The $20 to $30 million involved in the Iran- Contra arms affair must be seen in the light of an average new weapons contract, which would run around $300 to $400 million. Twenty million dollars in the arms business is so small an amount as to be invisible to the professionals. But the public loved Irangate because the sum involved was not only imaginable. it could even be picked apart with the tweezers of frustrated traditional moral indignation.
Meanwhile, every year. the Pentagon inexplicably loses -- simply loses -- about a billion dollars' worth of arms and equipment. [4] The budgets. the costs and the actual stocks are so large that they cannot be subjected to even the most sophisticated methods of accountancy. The numbers can be explained. They cannot, however, be reduced to a rational sequence. They are therefore so out of control that the loss of $1 billion is a mere statistical occurrence.
And so, while a nation looked under every mat, attempting to trace every penny of Irangate's $20 million, no one was held responsible for the loss of $1 billion. No one was fired. The admission of the loss produced a few mentions in a few papers and was promptly forgotten. Apart from incompetence and error the disappearance of $1 billion suggests a great leeway for fraud. given that the military is the single largest purchaser of goods and services in the United States.
At the same time as Irangate, the Pentagon Audit Committee was finishing a four-year investigation of corporate overcharging. They discovered that ninety-five contractors had lied about costs on 365 out of 774 contracts. The overcharge amounted to $788.9 million. Rockwell International Corporation on a single contract involving 340 bombs had overcharged by $7.4 million. While the nation agonized over Adnan Khashoggi's $12 million, federal investigators were finding it inexplicably difficult to bring themselves to lay contractor fraud charges in these 365 cases. [5]
The politicians who justify military expenditures claim that we are at peace. They talk of a peace bought through defence. Given their various political allegiances, they justify the costs in the name of Democracy, Capitalism, Socialism, Communism. the dictatorship of the proletariat or the struggle against the forces of colonialism. They also admit, with a shrug, that while defence budgets may be too high, they are also essential.
When out of power, those of the Left seize upon the arms business as a symbol of the military-industrial complex prophesied by that odd John and Jesus team -- the American Marxist intellectual C. Wright Mills and the conservative administrator Dwight D. Eisenhower. When in power, the Left adopts the attitude of the Right, which on this subject tends to say the same things whether in office or out. Thus governments of the Left and Right both lament the situation as the inescapable result of having had to face enemies who care nothing for their people and so spend vast amounts on weaponry. Western governments have had no choice, they argue, but to follow, suit. The various socialist governments of Britain, France and Germany have perfected this argument over the last three decades. Because of current events in the Soviet bloc, this rhetoric is now in limbo. It is already beginning to reemerge, however, in an appropriately amended form.
As for the great liberal centre, it remains relatively silent. Liberals know that much of the expansion in weapon production happened during their years in power. They know that they themselves applied the most rational modern methods available. The result was a rapid acceleration in arms spending. They feel that this must have been some terrible accident of history -- the coincidence of the Vietnam War with a growth in inflation, followed hard by the oil crisis, for example. And yet their rational methods should have been able to deal with these relatively limited problems.
Liberals also know what a disaster it is to appear naive. They dare not, therefore, speak out against arms production. And yet they, more than others, sense the real problem.
Arms production and sales have nothing to do with the existence of a military-industrial complex. That term implies a well-thought-out organization with an intent -- what the law would call forethought. But if the arms business is neither manageable nor accountable to its own experts, let alone to political figures, then it cannot be filled with forethought and intent.
The flowering of weaponry is the full expression of the genuine loss of purpose among the military, the administrators and the industrial elites of the West, all driven as much by their own confusion as by their unity of method. It is not surprising, therefore, that the politicians and the press, who feed off the elites in their search for subject matter, should have been unable to make more of the Iran affair than a trivial game of individual wrongdoing. They could have used this minute arms deal. as an opportunity to lay bare the way the American and most Western economies work on a day-to-day basis. Irangate was not an exception. It was a common transaction. One of thousands. But in order to take such an approach, people would have to accept that the selling of arms, for the first time in modern Western history, is no longer a marginal business.
***
For the last two decades the world has been overwhelmed by economic crisis and confusion. Our governments prefer to talk about periodic recessions while desperately attempting to unblock the economy with everything from tight to loose money, from high tariffs and massive foreign lending to low tariffs, inflated currencies and unrepayable domestic debt. Their most successful attempted solution, however, if measured in jobs created and products sold, has been the gradual conversion of our ailing half social democratic, half capitalistic societies from peacetime to wartime economics.
This situation is the result of a long Process which went into high speed during the early sixties, when a centre-left American government under Kennedy, a radical-conservative French government under de Gaulle and a socialist British government under Wilson each decided, for its own reasons, that the best way to finance indigenous weapons programs was to sell as many arms as possible abroad. It was all part of a new approach to government spending introduced by the first wave of apolitical technocrats. The underlying assumption was that a method which strengthened a nation's arms production would also increase its independence.
Charles de Gaulle was the first to start down this road. He came to power at the age of sixty-eight in an unstable political situation. In many ways the economy he inherited in 1958 was basically still in the nineteenth century. With his long-standing devotion to advanced military technology and his sense that he had only a limited time to work, de Gaulle set about modernizing military and civil France at breakneck speed.
A soldier with a vision, he had also suffered repeatedly at the hands of the sclerotic Napoleonic traditions of the army and its self-justifying general staff. He was also obliged to deal with an officer corps which had brought him to power and which therefore felt equally empowered to remove him.
Whatever he wanted to do to France as a whole, the military structure was the part he understood best. He therefore set about revolutionizing the entire economy through the military structure. This made far more sense than one might think. De Gaulle was convinced that the old army stood in the way of a new France. He believed, with the idealism of an eighteenth-century man of reason, that only a new technocratic officer class could drive out the mythology of the antidemocratic, antirepublican, antimechanized- arfare traditional officer corps.
He therefore promoted technical officers. The three principal generals of de Gaulle's years in office were all engineers -- Polytechnicians -- who immediately began to promote other technicians. Their percentage of the officer corps rose from twenty-five to fifty.
De Gaulle next started to feed credits through the army into the industrial sector. It was as a natural extension of this new military research and production that France began to sell arms abroad with greater aggressivity. Already in the late 1950s French foreign weapons sales were growing at 16 percent per year, while those of the rest of the world were at 10 percent. [6] This early growth was easy, given the tiny base from which the new government had begun.
In fact all appeared calm in the international arms market. The United States effortlessly dominated the scene by virtually giving away its weapons as a continuation of its Marshall Plan attitudes. Britain ran a comfortable second, thanks to the continued production of its war industries and to a virtual monopoly in its colonies and ex-colonies.
This situation exploded on February 6, 1961, when President Kennedy delivered a Special Message to Congress on America's general balance-of-payments crisis. The United States was three billion dollars on the wrong side. One of the central conclusions to which Kennedy -- that is, McNamara and the new Department of Defense technicians -- had come was that the United States could no longer afford to give away weapons. They had to be sold. More specifically, the United States had to sell many more weapons than it had been giving away. Kennedy presented this commercial reality in an idealistic package. He spoke of the need to defend democracy and the need for America's allies to undertake a drastic modernization of their military capabilities. The allies were to assume a greater burden in Western defence, but they were to do so with U.S. weapons, not their own. By buying in the United States, they would be compensating America for the heavy financial burden it bore as the defender of freedom. Kennedy was very specific. He went on to "urge the purchase of the new weapons and weapons systems by those of our allies who are financially capable of doing so." Rhetoric aside, the President was urging America's allies to subsidize the American economy by buying American arms. It was the perfect illustration of a phenomenon de Gaulle had described in his War Memoirs: "The United States approaches important matters with straightforward emotions which disguise complicated policies."
McNamara further confused the new policy with a backup explanation in the latest rational jargon. This official statement came in three parts, of which the first, although written in technocratic language, is well worth quoting:
1. To further the practice of co-operative logistics and standardization with our allies by integrating our supply systems to the maximum extent feasible and by helping to limit proliferation of different types of equipment. [7]
Like most of McNamara's policies, its real effect was the inverse of its announced or intended effect.
The frenzied proliferation of all weapons, including nuclear ones, over the last two decades, has its origins in this policy. The North Atlantic Council, the political arm of NATO, includes a committee -- called the Military Agency for Standardization -- to which each nation sends a representative. Its job is to discuss weapons and weapon systems with the idea of agreeing on a single standard for bullets, shells, rifles, tanks, fighters and so on. The theory is that all ammunition and parts should be interchangeable between the allies in times of crisis and that their common strategy is based upon a clear and practical understanding of the capabilities of one another's equipment. The unwritten principle is that this standardization will be reached through a trade-off between the various arms industries of the various allies. No one is to lose out by becoming a buyer who does not sell. If a Belgian rift=le is chosen, then the tank will be German and the plane American. The reality, however, was that the standardization committee had always been a door through which the United States could supply its allies. With the new Kennedy-McNamara policy, it became a door through which the United States sold its weapons.
Just enough non-American weapons had always been adopted under the standardization system to keep the allies happy. Occasionally European orders were part of specific NATO policy. The post-World War II rapid industrialization of northern Italy by Agnelli/Fiat was largely driven by military orders. The Impetus was a NATO conviction that prosperity would destroy the great power of the Communist party in that area, which it did. In general, however, cooperation, standardization and integration actually meant that the allies should buy American. What's more, the new sales policy came at the same time as America's new nuclear strategy of flexible response. One of the obvious consequences of this strategy, which the United States forced upon its allies, was that it required massive conventional rearmament by everyone. In other words Kennedy introduced a strategy requiring rearmament at the same time that he introduced a policy of selling weapons.
Finally the new arms commercialization policy was given a practical form. The Pentagon created the International Logistics Negotiations branch to look after selling weapons. Its first director, Henry Kuss, was the leading expert on arms supplies. He made no secret of what motor drove the policy. In a speech to a gathering of American arms manufacturers, he laid it out clearly:
From the military point of view we stand to lose all of the major international relationships paid for with grant aid money unless we can establish professional military relationships through the sales media.... The solution to the balance of payments deficit is principally in more trade. All other solutions merely temporize the problem. [8]
Thanks to his efforts, American arms sales rose sharply. But this aggressive approach also focused the minds of the allies, particularly the French. It was one of the three preliminary causes for French disenchantment with NATO. [9] Those who sat on the NATO standardization committee at that time remember the constant battles between Washington and Paris; the former expecting everyone to buy American, the latter insisting on French sales to the alliance equal to French purchases.
General Pierre Gallois, one of France's most original military thinkers, wrote that if Europe were to accept America's policy, it would become no more than "a producer of consumer products. As for the rest, why not save money and use whatever the Americans produce. On the commercial front there is nothing wrong with this division of labour except that it would turn Western Europe into an under-developed continent. We would have to slowly close our engineering schools, our laboratories, our research bodies and begin training our youth to be salesmen and to working solely under foreign license." [10]
Curiously enough, this ironic vision of a comfortable decline is not far from that being seriously recommended by most Western economists, who now believe it to be an absolute truth that nations should get out of industries which can be run cheaper by other nations. Thus the United States should get out of steel in favour of Asia. And Canada should get out of agriculture in favour of the United States. Had Europe believed such an idea in the early sixties, it would now be an economic wasteland instead of the largest economic force in the world.
The French refused this option in 1961 and set about redesigning their entire economy in order to compete on all fronts but, above all, in order to produce the latest weaponry. The Fifth National Plan emphasized six sectors which would theoretically secure independence and progress. All six reflected Ministry of Defence policies -- atomic energy, electronics, computers, aviation, rockets and satellites. In electronics, 50 percent of the products were for the military sector. The entire economy responded to this massive injection of R and D funds. And the remarkable integration of the national elites made the whole idea of a military-industrial complex irrelevant. The military engineering school -- the Polytechnique -- produced the army's technicians as well as many of the senior bureaucrats and corporate leaders. There could not be a complex when there was only one elite, one source of financing, and no strong legal division between politics, defence, and industry. No time was spent on conflict-of-interest questions. There was only one interest.
An American aeronautics corporation might have two thousand of its eight thousand engineers devoted to such jobs as analysis and control. This was necessary because the company would have to justify (not explain) every detail of a project to its own government, argue the merits of the product, win over politicians and demonstrate the quality of its management methods, its control over subcontractors and its cost controls. And it would have to do the same with foreign governments for all international sales. A French corporation would have almost no one working in these areas. The technocrats in their own government would handle most of this through the Ministerial Delegation for Armaments.
Such elite integration was only a foreshadowing of that same unity in other Western countries. Elsewhere the official public barriers between government, industry and army maintained the fiction that there were real levers of control over armaments policy. However, the unity in approach of the technocrats in all three sectors meant that they could effortlessly develop policy across the lines, without reference to the control levers. The public niceties could all be dealt with after the fact. Legal and legislative approval of administrative action came to resemble a ribbon-cutting ceremony.
The French elites were not at all unconscious of the fact that their economy was being remodelled through military priorities. They believed that only the army could afford the kind of investments necessary to keep high-tech industries on the cutting edge of creativity.
This particular argument has become a great favourite in the late twentieth century. It is used everywhere on the globe when there is a need to justify military financing. The reality is that military investment is merely a facet of government investment. Whether these funds are earmarked for military or civilian Rand D is neither here nor there.
In any case, as early as the 1960s the French army was officially providing 30 percent of the nation's R and D investments. In reality, the percentage of total national Rand D devoted to the military sector was closer to 70 percent. [11] This same phenomenon was slower to take effect in the United States, thanks to the relatively healthy state of general industry before 1973. By 1980, however, 40 percent of American Rand D was for military programs. And by 1985 it represented 50 percent of university research. By 1988, 70 percent of government-supported R and D was military.
De Gaulle's point had been that only the- state can judge what research "is most useful to the public interest." [12] Political leaders around the world came to agree with this idea. They seemed to have little choice, because the situation they discovered on arriving in office consisted of a seamless web uniting R and D and military equipment. There did not appear to be any other way to do research. The only question, then, was to find ways to pay for both this research and the resulting "need" for new military equipment. The answer, quite simply, was to export. The sale of two hundred fighters abroad would finance the fifty planes needed for the nation's air force.
This economic-political-military truism -- that national independence could be accomplished through domestic arms production, provided it was financed through exports -- was to become a new religion in the Western world. Technocrats everywhere -- whether officers or administrators -- explained to their employers the remarkable benefits which this cycle would bring to the home economy. And what were perceived as the American and French successes seemed all the more attractive when compared to the British failure.
London had not turned its attention to a national arms policy fast enough and so had frittered away its postwar advantages, losing even most of its ex-colonial markets. By 1966 Harold Wilson and his Defence Minister Denis Healey had decided in desperation to join the race. Both men came from the left wing of the Labour party. And, in another reminder of the irrelevance of both ideology and militarism in what was happening, two of the three men central to the creation and running of the British Defence Sales organization were plucked from the automobile industry, just as in the United States, Robert McNamara had come to Defense from Detroit. The growth in the arms market was an industrial- administrative undertaking, not a military one. It had to do with the production and sale of mechanized and computerized material. Most of the people involved were not thinking seriously about the nature of that material.
The new British Defence Sales group was able to stop the collapse of the U.K. markets and London held on to fourth place in the ever-expanding world market, By the late eighties, Britain was again rivalling France for third place.
But everyone else had caught on to the trend long before that. By the late sixties, the Swedes, the Swiss, the Belgians, the Germans and the Italians were travelling the world selling their arms. The end of colonialism meant the rise of new states. New states meant new armies in need of new weaponry. These young governments were eager to buy but short of cash. That turned out to be a simple technical problem. The same Western governments which sold them the weapons would finance their expenditures through aid programs or general bank loans or specific armament-financing agreements, all facilitated by subsidized low pricing.
In other words the sellers were not actually financing their own military needs through foreign sales, because they were also financing the buyers. According to their rational accounting system, a fighter sold abroad more or less paid for a fighter in the home air force. In reality the seller government was paying for both. The whole process was and is little more than an inflationary chain in which money, in the form of debt, must be printed to finance the production of nonproductive goods to be stored at home or in other countries.
After a decade of this overexcited world competition for markets, the general economic crisis of 1973 threw governments and businesses into a confusion from which they still have not emerged. None of them were clear as to what had happened, The technocrats could see that the growth machinery was seriously stalled for the first ,time since 1945. They flailed around blindly for remedies, all of which failed. Printing money. Not printing money. Heavy industrial investment. Hard-nosed refusals to invest in sick; heavy industries. No matter what they spent or didn't spend, taxed or didn't tax, the economic body wouldn't move.
The only sector which responded positively and promptly to government stimulation was the arms industry. Tax breaks aimed at a normal industrial sector or Rand D subsidies or depreciation benefits or any other support which lies within the competence or a government, may well encourage companies to produce. But that doesn't create consumers to buy. In times of economic troubles, consumers do not leap at products. They limit their expenses.
The arms industry, however, was and is a perfectly artificial business, not subject to real market conditions. Armaments are the ideal consumer product, because even the consumer is artificial. That is to say the consumer is a government, not an individual.
Moving the financial chips around in a circle suddenly took on a new importance. Paying countries to buy your weapons was a way to stimulate your own immobile economy. Ordering weapons at home for your own forces accomplished the same thing. The more weapons your own industry built for home or abroad. the more money you had to print. But this didn't look like classic inflationary economics. Governments were printing complex debt papers, not old-fashioned debt notes. Besides, patriotism was involved as well as export encouragement programs. International trade-offs could no longer be seen as expenditures. They were now stimulants.
The production of so many weapons has indeed kept men working in difficult times. Counting only directly related industries, some 400,000 jobs are now involved in the United States and 750,000 in Europe. But, curiously enough, as the socioeconomic role of building weapons has grown, the actual question of whether the selling producer is well defended has slipped into the background. The primary arguments surrounding most arms projects today relate to jobs, industrial structure, trade balances and technological development. The arms manufacturers have understood this and act accordingly.
In 1981, for example, Rockwell International sold Congress on the B-1B bomber by telling them that it would be composed of systems built in forty-eight of the American states, a remarkable bit of political-industrial economics. In 1986 in Britain Plessy justified its sale of six AR-3D radar systems to Iran for £240 million by stating: "This contract represents two years of work for 1,500 of our workers." "The Iranians," they added, "have promised not to use this system against the Iraquis." No doubt they were buying it to track shooting stars. Caspar Weinberger, President Reagan's Secretary of Defense, at least knew how to be perfectly straightforward: "We must remember at least 350,000 jobs are at stake and will be lost if there are any drastic military cuts." All in all the building of weapons has become the most important source of make-work projects in the late twentieth century. Neoconservatives may condemn Franklin D. Roosevelt's WPA projects, but at least they kept the countryside clean and were reasonably cheap.
***
The idea that building weapons is a good way to create jobs and to earn foreign currency is so naive as to have a certain charm about it. Even to believe that military spending might help the economy is revolutionary. Throughout history, military spending has been considered a disaster for economies. The twentieth-century Western belief in the opposite is, in part, a curious offshoot of Keynesian economics, produced by the conviction that it took World War II to end the depression. One of the extra lunacies of current economics is that while Keynes is now considered bad, weapon production programs are still good.
In order to obscure this contradiction, economists came up with the theory of "the trickle- down effect." The investment, for example, of several billion dollars into a nongrowth area such as tanks, in the hope that there will be a trickle down of a hundred million dollars, into civil transport, is presented as an efficient form of industrial investment.
Those who defend this theory always cite a long list of successes. There is hardly a plane or a radio which is not derivative of something military. Fast trains. New metals. The entire nuclear energy sector. Digital electronics. Satellite communications. The list is endless. And there are no signs of a waning in the political conviction that this is the .right way to do research. During his first presidential campaign, George Bush went out of his way to reply to his opponents' complaint that 70 percent of federal support for Rand D goes to the defence establishment: "Critics ignore the importance of defense research to science and technology, manufacturing and trade -- expanding the frontiers of our knowledge - and contributing to our prosperity." [13]
The interesting question, however, is not whether this system works but whether any other system works better. Why can't governments make their investments directly in those civil sectors which they have been hoping might receive a few drops of new knowledge from military research? If civilian Rand D is what we are really after, then the trickle-down system is an astonishingly inefficient way of going about it.
None of this is to suggest that all weapons could simply disappear or even that they should. It is merely to point out that Western economic priorities have never been so back to front.