State Capitalism on Behalf of Militarism

General News 6/26/2015 at 11:48:22

By Natylie Baldwin (about the author) Permalink (Page 1 of 3 pages)
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There is much debate on what the nature of the Soviet Union’s economy actually was. It is agreed by many that it wasn’t in reality a true socialist or even a communist system. Some, like Seymour Melman and Jack Matlock, argue that it was something closer to a state-run capitalist system with a vanguard political party controlling it.

What is hard to argue with is the fact that what constituted a huge part of the Soviet economy in terms of input of resources — and, ironically, what it has had in common with the U.S. economy — was a sprawling and wasteful military-industrial complex guaranteed by the state to enable an arms race.

The Military-Industrial Complex in the United States

In 1864, President Lincoln expressed profound concern over the rise of corporations resulting from the Civil War and what it portended for the political and economic future of the country.

Advancement in industrialization led to more mechanized and phenomenally more destructive warfare in the 20th century, with the outcomes increasingly dependent upon material production and technology.

In World War I, military officers still played a critical role in the decisions to wage war which were based on previous strategies that were soon rendered outmoded due to a lack of technological expertise and inability to manage the more complicated industrial economics crucial to sustaining modern warfare. Thus, for expediency, government allowed responsibility for the war economy to be transferred from the Army to private industrialists who controlled the terms of war organization and procurement through the War Industries Board (WIB), a body comprised primarily of corporate executives and bankers.

Once this arrangement was established it was difficult to put the proverbial genie back in the bottle. Many of the major anti-competitive trusts running the war economy through the WIB had long desired a relationship with the state that would facilitate public subsidy of their interests. The war effort had proven a convenient means to this end.


Between 1918 and 1941, formal patronage was fostered between the War Department and Big Business for the first time outside the context of an actual war. Drawing on the WIB model, the War Production Board instituted favorable tax and profit standards for major industrialists who again dictated policies within their own economic sectors during World War II, usurping substantial decision-making from state actors.

Since 1945, the power, reach and ambition of multinational corporations have expanded, including encroachment into areas traditionally considered part of the public interest and outside of its domain.

More sophisticated, diversified and structured than historical mercenaries, Private Military Firms (PMF’s) have proliferated since the collapse of the Cold War. These companies have participated in conflicts from the civil war in Sierra Leone to the Balkans conflict. They played an increasing role in the Iraq war, with Blackwater (now Academi) being the most controversial with the September 2007 killing of 17 civilians and the wounding of 20 more in Nisour Square in Baghdad. Just prior to those killings, a high level manager of the company reportedly issued a death threat to a State Department official who was in Iraq investigating the company’s practices.

A 2014 report issued by Remote Control Project in Britain found that the US Special Operations Command is outsourcing sensitive activities like flying drones, target acquisition oversight, communications, prisoner interrogations, translation of captured material and information management. The report raises concerns due to the challenges that remote warfare has in terms of accountability and oversight. The concern is compounded by the fact that the Obama administration has not decreased war and militarism but has increasingly reorganized it to be under the auspices of covert and special operations with a presence in nearly 70 percent of the world’s nations at 134, up from around 60 nations at the end of the Bush II era. Funding for the Special Operations Command has risen from $2.3 billion in 2001 to a total of $10.4 billion in 2013.

In an investigative report on Obama’s covert-special ops policy, Nick Turse detailed the administration’s militaristic foreign policy:


Although elected in 2008 by many who saw him as an antiwar candidate, President Obama has proved to be a decidedly hawkish commander-in-chief. While the Obama administration oversaw a US withdrawal from Iraq (negotiated by his predecessor), as well as a drawdown of US forces in Afghanistan (after a major military surge in that country), the president has presided over a ramping up of the US military presence in Africa, a reinvigoration of efforts in Latin America, and tough talk about a rebalancing or “pivot to Asia”. The White House has also overseen an exponential expansion of America’s drone war. While President Bush launched 51 such strikes, President Obama has presided over 330. Last year, alone, the US also engaged in combat operations in Afghanistan, Libya, Pakistan, Somalia and Yemen. Recent revelations from National Security Agency whistleblower Edward Snowden have [also] demonstrated the tremendous breadth and global reach of US electronic surveillance during the Obama years.
An article in The Daily Beast revealed that many employees of these contractors expect new opportunities with Obama’s long-term plan to fight ISIS in Iraq and Syria without “boots on the ground” by following his established pattern of using covert players to obscure the extent of U.S. involvement: “One U.S. military contractor working in Iraq who asked not to be named said, ‘I can tell you the contractor-expat community is abuzz thinking this will lead to more work. We expect a much larger footprint than he is showing right now.'”
Then there are the more mundane support services for both overt and covert military operations provided by firms like KBR which provide ice delivery, trash disposal and portable toilet maintenance, among other services. These contractors and their sub-contractors, like Najilaa Catering Services International, have often performed poorly or committed outright fraud. But that usually doesn’t stop them from continuing to procure contracts with the US government.

Najilaa, for instance, had been under fire for non-payment of bills and fraud in both Iraq and Kuwait prior to being signed on to provide food preparation services to USAID in Iraq in February of 2010. KBR has been plagued with continuing allegations of overcharging and poor service for more than 10 years. In 2011, KBR was hit with an $85 million verdict for exposing members of the Oregon Army National Guard to toxic chemicals while serving in Iraq.

This kind of fraud and waste, however, is not unique to these relatively small players. It is indeed rampant among the top 5 defense contractors: Lockheed Martin, Boeing, Northrup Grumann, General Dynamics, and Raytheon, with 3 of these 5 also occupying the top slots in federal contractor misconduct.

According to the Project on Government Oversight (POGO), Lockheed Martin has more contracts with the federal government than any other company. It also has the most misconduct violations, ranging from age discrimination to contract fraud and unfair business practices, totaling over $600 million in fines, penalties and settlements.

A June 2011 POGO press release states that Boeing overcharged the Army millions in spare helicopter parts, such as $1,678.61 “for a plastic roller assembly that could have been purchased for $7.71 internally from the Department of Defense’s own supplies.” Boeing is ranked second in instances of contractor misconduct.

These kinds of antics have no effect on these companies’ status as government contractors. The fact that the top 5 defense contractors named above were among the top 6 defense industry contributors to federal political candidates and parties in the 2014 election cycle undoubtedly plays a major role.

Furthermore, this kind of waste has been largely built into the system of Pentagon contracting over the years in the form of cost-plus practices in the negotiation process. As the late Seymour Melman, an analyst who specialized in the workings of the military-industrial complex, detailed in his writings, the practice of cost-plus or cost-maximizing defense contracts, in which an agreed upon profit margin was simply added on to the previous cost of producing the product or service, had cropped up during WWII and was institutionalized during Robert McNamara’s tenure as Defense Secretary during the Vietnam War. Not only did this practice result in increasingly inflated price tags for the tax payer, it also discouraged quality control and increases in productivity, and encouraged labor unions in the affected industries to partner with management to the detriment of their own interests. Moreover, the practice bled over into other sectors of the government, such as health care contracts, and even into the private sector.

This cost-maximization, combined with the frequency of no bidding and the companies’ generous campaign contributions, makes these kinds of problems all too pervasive and easy to predict.

When more and more private corporations have entered the market with a profit motive in favor of military conflict, incentives to overcharge taxpayers built into the system, and legalized bribery that passes for campaign financing, what are the chances for a conversion from a war economy to a peaceful, civilian economy as the end of the Cold War provided an opportunity for?

A Formula for Economic Conversion

“Whatever else you can do with a tank, you can’t eat it, wear it, live in it or travel in it. And whatever else you can do with a nuclear-powered submarine or with a military helicopter, you can’t produce anything with it.” — Seymour Melman

Melman’s proposals for economic conversion were predicated upon a partnership between management and labor. For practical reasons, the workers needed to be part of the planning due to their intimate knowledge of the parts, tools and machinery involved in current production and its potential utility in manufacturing civilian goods and determining which ones would have the most successful possible outcome for conversion. Members of corporate management, who were typically far removed from the daily workings on the floor, would often make conversion plans on paper — if left to their own devices — that were unworkable when put into practice. Initial attempts at conversion in the Soviet Union failed due to this very problem.


The most comprehensive legislative bill proposed in 1988 to implement such a plan was one sponsored by Ted Weiss and called for the establishment of Alternative Use Committees, comprised of an equal number of representatives from management and labor. The committees would have been tasked with preparing “a complete technical economic plan for the use of the people and facilities following termination of work for the Pentagon.”

The legislation would have also mandated occupational retraining for engineers and managers who were veterans of Pentagon work for 10 years or longer. This was to ensure proper training for cost-minimizing instead of the entrenched practice of cost-maximizing fostered in the defense industry. The conversion program would have been overseen by the Commerce Department to encourage all levels of government to prepare their budgets accordingly in support of conversion.

This bill (HR 103) was the culmination of meetings that then-House Speaker Jim Wright had convened of congress members committed to the conversion opportunities that the end of the Cold War provided.

In the weeks following the bill’s historic introduction, however, a smear campaign against Speaker Wright was initiated — led by Newt Gingrich, who’s district just happened to be home to the headquarters of Lockheed Martin — based on trumped up charges of financial misconduct, forcing Wright’s resignation.

With the bill’s most powerful shepherd effectively eliminated, the legislation died quietly.


What Failure of the Peace Dividend Meant for the US

As the end of the Cold War beckoned in the late 1980s and, along with it, the potential for redirection of resources to improve the living standards of communities across America, Melman noted that 50 percent of the discretionary federal budget at that time went to the Pentagon. The percentage projected for the 2015 budget was 54 percent. Meanwhile, 3 percent is allotted to “international affairs” — meaning that some portion of that 3 percent goes to diplomacy, which speaks volumes about our leaders’ priorities and approach to international relations

What all that investment into militarism ultimately translates into is investment not made into the infrastructure for American citizens and their day-to-day needs. To illustrate this point, Melman also discussed the state of American domestic infrastructure by 1990 and how it had suffered from the diversion of resources into the MIC:

Instead of seizing the opportunity provided by the end of the Cold War and investing in the improvement of Americans’ lives, we have continued to feed the same amounts or more into the voracious military economy with our domestic infrastructure in worse shape than ever. The American Society of Civil Engineers Infrastructure Report Card for the US in 2013 was a D+; meanwhile, the New York Times just reported that the federal government will be investing as much as $1 trillion in modernizing our nuclear weapons arsenal over the next 30 years, using the confrontation with Russia over Ukraine as partial justification.

The early stages of another negative trend was observed by Melman with respect to the deindustrialization of the American economy whereby the nation gradually loses the ability to produce essential goods and to repair the basic infrastructure needed to create and repair those essential goods. For example, he described how the US was becoming dependent upon foreign production of basic machinery and tools that were no longer made in the US. This deindustrialization leads to loss of living wage jobs and loss of national independence and self-sufficiency in important areas of the economy. That trend has accelerated in the twenty-four years since and all of the social consequences one would likely expect are visible all around Americans, with the exception of the most wealthy and insulated.

One of the more pernicious consequences of this deindustrialization is that the lack of living wage jobs that used to be available to those with little or no post-secondary education drives more youth into the professional military as they seek a stable income and educational opportunities, reinforcing the militarist feedback loop.

One of the strangest blind spots that the American oligarchy seems to have is what their own system has in common with some of the failed aspects of the Soviet Union and that they somehow think they will avoid the same fate.

Note: This article is an expansion on issues relating to the military-industrial-complex that were discussed in Chapter 1 of Ukraine: Zbig’s Grand Chessboard & How the West Was Checkmated.

Natylie Baldwin is co-author of Ukraine: Zbig’s Grand Chessboard & How the West Was Checkmated, available from Tayen Lane Publishing. Her fiction and nonfiction have appeared in various publications including Sun Monthly, Dissident Voice, (more…)

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