The Defense Economy

Our Depleted Society.
by Seymour Melman.
Holt, Rinehart & Winston. 366 pp. $5.95.

For fifteen years military Keynesianism has sustained the American economy. Year after year the defense budget and the space program have absorbed a tenth of our manpower, capital equipment, and raw materials. When economists say that the federal budget is an important stabilizing influence and one of the reasons why business cycle fluctuations since 1945 have become so gentle, they are really talking about military outlays which amount to considerably more than half of all federal spending. Yet in spite of the dependable $50 billion or so that the Pentagon and the National Space Agency disburse each year, unemployment has been unsatisfactorily high and factories have operated at unsatisfactorily low percentages of capacity. In other words, the private sector of the economy has definitely failed to generate the jobs and the incomes necessary for full employment.

This persistent economic slack explains the fears of lost profits and of additional unemployment which have given powerful support to the operations of the military-industrial complex recognized so astonishingly by General Eisenhower in his last Presidential address. These fears compel Congressmen, on pain of political demise, to protest the closing of defense installations in their districts (however unnecessary such installations may be) and to clamor competitively for the military contracts which their constituents see as the difference between idleness and prosperity. And it is these same fears that help to explain why Congress has appropriated only trivial sums for the study of reconversion and has expended no real thought upon the requirements of a peaceful society.

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As his previous writings document, Seymour Melman is no partisan of the military path to prosperity. In Our Depleted Society he devotes himself to the demonstration of three major propositions. The first alleges that we waste huge amounts of resources on the creation of additional over-kill capacity—the still larger stocks of missiles in additional Polaris submarines and “hardened” land missile sites, which even Secretary McNamara concedes are a poor insurance of real security. In Congressional testimony Mr. McNamara has said that “we are approaching an era when it will become increasingly improbable that either side could destroy a sufficiently large portion of the other's strategic nuclear force, either by surprise or otherwise, to preclude a devastating retaliatory blow. This may result in mutual deterrence, but it is still a grim prospect.”

From this analysis the Secretary drew the inference that “until we can find a safe and sure road to disarmament, we must continue to build our own defenses.” From the same line of reasoning, Mr. Melman derives a very different line of conduct: since the arms race is itself highly dangerous, we should turn to arms limitation and competitive disarmament. Our superiority in missiles to the Russians does not seem to have improved our position in the world. Would we feel safer or stronger if our missile superiority were 6 to 1 instead of 3 to 1? On the face of it, Mr. Melman has the better of the argument, even if one quarrels about the exact amount of arms reduction which is desirable.

Mr. Melman's second major point is implied by the title of the book. An industrial engineer by profession, Mr. Melman is convinced that military and space programs have drained the civilian sector of the first-class talents that once made America the competitive star of the world. Today, as scientists, technicians, engineers, economists, psychologists, and sociologists respond to the lures in pay and prestige of the aerospace industry, the Pentagon, and the think-factories, the civilian economy stagnates. Swedish and Japanese shipyards overwhelm our inefficient civilian shipbuilders. Italian managers instruct Americans in the manufacture of typewriters. Japanese mass transportation puts the decrepit American railroads to shame. European sewing machines swamp the products of the land which invented the device. Worse still, the ingenious, inventive minds that might have turned to the making of revolutions in social welfare and mass housing, or to more radical assaults on poverty, are instead wasting themselves either on the improvement of nuclear technology or the production of the “military science fiction” which is the specialty of the Rand Corporation, the Hudson Institute, the Institute of Defense Analysis, and other lesser fabricators of hurtful dreams.

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All this makes an important theme, and it is a pity that Mr. Melman damages his statement of it by inconsistency and exaggeration. Thus on page 50 the American auto industry is listed among those which continue to use inordinate percentages of elderly machines, and are therefore “depleted.” But only seven pages later, the auto industry is praised for its ability “to produce cars at the lowest price per pound of fabricated vehicle in the world.” Is this an argument for old equipment? Nor does Mr. Melman's conclusion that American industry has become less competitive jibe either with the economic fact that we have been running persistently favorable merchandise balances of trade with the rest of the world (including Western Europe, Scandinavia, and Japan), or with the political reality that countries in the Common Market (not France alone) have been alarmed enough by the competitive threat of “depleted” American firms to examine various ways of limiting American investment in European industry and facilities. Finally, it is odd to cite Russia's newer machines and more efficient shipyards as evidence of the depletion thesis. If military expenditure has really weakened the American economy, what should the condition be of a Russian economy which has been devoting twice as large a percentage of its GNP to defense and space?

The third element in Mr. Melman's assault upon how we spend our money is an ingenious description of the many ways in which the resources released by disarmament could be used to relieve American destitution, improve the public amenities available to Americans in general, and assist the underdeveloped countries. For example, at current prices, one Polaris submarine armed with 16 missiles costs $122,600,000—a sum which could purchase 331 elementary schools, or 6,811 hospital beds, or 13,723 public-housing units. Take an even more evident boondoggle, the $358,000,000 spent on civil defense. With that amount of money, we could build 40,071 public-housing units, 967 elementary schools, 249 secondary schools, or 32,545 nursing-home beds. Moreover, the kind of employment such outlays would create is of the kind least threatened by automation.

In other words, we can have full employment in a peacetime economy if the will to disarm and the will to plan are both present. Unfortunately, it is precisely at this point that Mr. Melman's argument begins to take on a tone of optimism little supported by current events. Would Congress transfer resources in these eminently sensible ways? A little experiment which bears on the prospect has just been run. Two successive Chairmen of the Council of Economic Advisers, Walter Heller and Gardner Ackley, have persuaded two Presidents that the progressive tax system produces dangerous tendencies toward surplus. Unless the $7 billion which a prosperous economy adds to federal receipts is returned to the economy, recession looms. Here are annual sums for the social goals Mr. Melman talks about.

Yet, two Presidents have decided that the bulk of largesse should be disbursed in tax reduction, and Mr. Johnson has held out hope of still another tax cut in 1966. It would seem, then, that for many Americans reconversion looks like a major economic catastrophe; for them expenditure on social programs is not an acceptable alternative to defense spending. The political obstacles to rational use of public funds which Keynes identified in 1936 are still high. They remain the strongest allies of the military-industrial complex.

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However, none of these reservations seriously impairs the value of Our Depleted Society. The book's major arguments make good sense. We are spending too much on arms. We are diverting too many creative people into sterile activity, at a steep cost both to them and to our society. We could channel their energies into more wholesome activities. We owe something to the freelancers like Seymour Melman who rake up the evidence and shout their anger at the top of their voices. Some foundation could do worse than endow a think factory, headed by the likes of Mr. Melman, and devoted to careful examination of disarmament, reeducation, and reconversion.

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