Moving from a War Economy to a Peace Economy

Behind every question about how to get the United States back on track and improve the lives of average Americans (the so-called 99 percent) lies the necessity for economic conversion--that is, planning, designing, and implementing a transformation from a war economy to a peace economy. Historically, this is an effort that would include a changeover from military to civilian work in industrial facilities, in laboratories, and at U.S. military bases.

To that end, I am compelled to share what I've learned from reading Seymour Melman, the most prolific writer on the topic.

Melman was a professor emeritus of industrial engineering at Columbia University. He joined the Columbia faculty in 1949 and, by all reports, was a popular instructor for over five decades until he retired from teaching in 2003. (He died a year later.)

Melman was also an active member of the peace movement. He was the co-chair of the Committee for a Sane Nuclear Policy (SANE), and the creator and chair of the National Commission for Economic Conversion and Disarmament. It is reported that Melman was under surveillance by the FBI for much of his career because of his work criticizing the military-industrial complex--a sure sign that there must be something worth hearing in his work. What did he say that the power structure feared?

The economic conversion movement in past decades played a valuable role in bringing together the peace movement and union leadership to do the heady work of imaging how this country could sustain industrial jobs when, as it was envisioned, the United States would cease production of the weapons of the Cold War. It is a history that should not be forgotten.

Melman noted that U.S. industry had historically followed an established set of market rules: industry created products consumers needed or wanted, sold those products, made a profit, and then used those profits to improve production by upgrading the tools for more efficient production.

Military production for World War II began to change these rules of industry, which were later institutionalized in the 1960s when Robert McNamara was secretary of defense. McNamara, who came to the Pentagon after his tenure as an executive at Ford Motor Company, implemented some critical changes.

Within the Pentagon, civilian and uniformed officials were in conflict about the procedures for how to determine the costs of weapons to be contracted for manufacturing. On the one side, led by an industrial engineer, the idea was to base costs on the formulation of alternative designs and production methods--a competitive approach that promoted economic growth. The other side proposed generating costs based on what was previously spent. For the Pentagon, this meant following the "cost-plus" system used during World War II, also known as cost maximizing. As Melman put it in his 2001 book, After Capitalism, "contractors could take the previous cost of making a product for the Pentagon and simply add on an agreed-upon profit margin."

McNamara opted for the second option. The result was that by 1980, the cost of producing major weapons systems had grown at an annual rate of 20 percent. Melman observed that by 1996, the cost of the B-2 bomber exceeded the value of its weight in gold.

McNamara went on to model the Pentagon after a corporate central office, defining policy, appointing chiefs of subordinate units, and maintaining accounting and management functions with huge discretion. Each military service participated in the process of acquiring material and weapons. This process resulted in tens of thousands of employees becoming hundreds of thousands, paid with U.S. tax dollars, to maximize the profits of weapons producers.

Melman minced no words in articulating the consequences in the opening of his book, Pentagon Capitalism (1970) and later in The Demilitarized Society (1989):

The operation of a permanent military economy makes the president the chief executive officer of the state management controlling the largest single block of capital resources"this combination of [economic, political, and military] powers in the same hands has been a feature of statist societies--communist, fascist, and others--where individual rights cannot constrain central rule.

"Nowhere in the constitution is top economic power conferred.

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