Friday, January 06, 2012

Where did the money go?

[A timely guest post from Gary, with all the anti-Iranian sabre-rattling going on. Spurred on by its political parasitic twin Israel, Washington seems poised to shoot itself right in the wallet. I believe that's called a "beauty shot."]

The lesson that the United States desperately needs to learn is that their trillion-dollar-a-year military is nothing more than a gigantic public money sponge that provokes outrage among friends and enemies alike and puts the country in ill repute. It is useless against its enemies, because they know better than to engage it directly. It can never be used to defeat any of the major nuclear powers, because sufficient deterrence against it can be maintained for relatively little money. It can never defuse a popular insurgency, because that takes political and diplomatic finesse, not a compulsion to bomb faraway places. Political and diplomatic finesse cannot be procured, even for a trillion dollars, even in a country that believes in extreme makeovers. As Vladimir Putin put it, “If grandmother had testicles, she’d be a grandfather.”

Reinventing Collapse, 2nd ed., p. 41

Military Keynesianism and America’s Declining Infrastructure

In August 2007, the nation was stunned by the collapse of a major Minneapolis bridge, killing thirteen. The bridge had been rated structurally deficient by the U.S. government as far back as 1990, and it was only one of 72,868 bridges (12.1%) across the country with that rating.  They also rated 89.024 bridges (14.8%) as functionally obsolete. Here closer to my home the eighty year old Champlain Bridge, also known as the Crown Point Bridge, was closed in October 2009 due to extensive corrosion of two structural piers. At least it was condemned before it fell down.  Two years later a replacement bridge has been completed, but not without substantial inconvenience and economic loss to business and workers on both sides of the bridge.  People were forced to take a ferry during reconstruction.  The DOT states the average design life of US bridges is 50 years with an average current age of 43.  The American Society of Civil Engineers estimates that it would take nearly $930 billion to fix the country's failing bridges and roads over the next five years.  With estimated spending of $380.5 billion, they predict a shortfall of $549.5 billion. 

Where did all the money go?  The recently deceased Chalmers Johnson called it "Military Keynesianism".  For those who don't follow arcane economics lingo, Keynes was a British economist who said that in a period of slow or declining economic growth (recession or depression), that government spending was needed to "prime the pump" of the economy.  The US recovery from the Great Depression with help from WWII military spending gave credence to this analysis.  Except now we have permanent Military Keynesianism.
Johnson cites an incredible statistic from the late Seymour Melman, the Columbia University advocate of military conversion, and the "peace dividend".  "By 1990, the value of the weapons, equipment, and factories devoted to the military was 83% of the value of all plants and equipment in American Manufacturing.  From 1947-1990 the combined US military budget amounted to $8.7 trillion...Military industries crowd out the civilian economy (ed-and other government spending like bridges) and lead to severe economic weakness.” Consider that the US military is now spending over $1 trillion per year including all black and related expenses, which is more than the entire rest of the world combined.  The next biggest spender is China at $91.5 billion according to Chinese figures.  Johnson summarizes, “Devotion to military Keynesianism is, in fact, a form of slow economic suicide."

But isn't war good for the economy as former President George W. Bush told Argentine President Kirchner in Oliver Stone's recent movie "South of the Border?"  Johnson quotes historian Thomas Woods,  "According to the US DOD, during the four decades from 1947 through 1987 it used (in 1982 dollars)  $7.62 trillion in capital resources.  In 1985 the Dept of Commerce estimated the value of the nation's plant and equipment and infrastructure at just over $7.29 trillion.  In other words, the amount spent over that period could have doubled the American capital stock or modernized and replaced its existing stock."

Johnson cites a study by economist Dean Baker of CEPR in 2007 that concludes, "In fact most economic models show that military spending diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment."  Why would this be?  Think about nuclear weapons.  The best possible use for them is not to use them at all.  At the peak the US had 32,500 nuclear weapons.  Think about the massive cost of something that then (thankfully) sits on the shelf and provides no use to anyone.

Finally Johnson quotes Harvard economics professor Benjamin Friedman, "Again and again it has always been the world's leading lending country that has been the premier country in terms of political influence, diplomatic influence, and cultural influence...we are now the world's biggest debtor country, and we are continuing to wield influence on the basis of military prowess alone."  Think about that when you pay your family's $10,000 per year contribution to the Iraq and Afghanistan wars. 

Back in the 1980’s Gorbachev cut Soviet military spending, and predicted that the US would continue to spend itself into oblivion.  Who will stop the madness of military Keynesianism? Obomber or Romney? LOL. Johnson concludes, "Our short tenure as the world's "lone superpower" has come to an end."  All that's left is for the fat lady to sing, when the US goes broke.  It won't be long now.

All quotes from Dismantling the Empire, by Chalmers Johnson, Metropolitan Books/Henry Holt and Co. 2010


Larry said...

"The Military is a hard thing to control"

Kevin said...

It's all very depressing.

Can anyone with some expertise tell me whether it's in any degree feasible to retool or adapt these military factories to domestic civilian manufacturing? I suppose that facilities designed to produce only guns, bombs, planes, tanks, nuclear warheads, $10,000 toilet seats and the like are probably useless for anything else, but might I be mistaken about that?

Then there's the question of whether anyone in the USA or the world for that matter will be able to afford what (if anything) we produce.

Frankly it would be a relief and an astonishment to me to see the United States do *anything* intelligent at the national level, or the state level for that matter. An attempt to revive domestic manufacturing might be among the possibilities, if national and world markets aren't too moribund to support it.

Dr. Doom said...

It worked for the Romans and the Mayans and the Aztecs and the Spanish and the French and the British and the Dutch and the Germans, until it didn't.

Lance M. Foster said...

More from Chalmers Johnson, a former CIA consultant and self-described "spear-carrier" for the U.S. empire:

""The only hope for the planet is the isolation and neutralization of the United States by the international community," Chalmers explains. "Policies to do so are underway in every democratic country on earth in quiet, unobtrusive ways. If the United States is not checkmated and nuclear war ensues, civilization as we know it will disappear and the United States will go into the history books along with the Huns and the Nazis as a scourge of human life itself."
Johnson explained the "sorrows" mentioned in his latest book in an interview with Steve Dalforno of Z magazine last November.
"I think four sorrows inevitably accompany our current path. First is endless war... As it stands right now, since 9/11, Articles 4 and 6 of the Bill of Rights are dead letters. They are over... Second, imperial overstretch... The third thing is a tremendous rise in lying and deceit... The difficulty to believe anything that the government says any longer because they are now systematically lying to us on almost every issue. The fourth is bankruptcy. Attempting to dominate the world militarily is a very expensive proposition... The United States, for the last 15 years, has had trade deficits running at 5 percent every year. We are on the edge."

PS. From the same website: "Moving to Canada will probably not be a solution for US citizens seeking to escape the breakdown of American democracy, just like Jews who moved from Berlin to Amsterdam in 1933 didn't go far enough away from the Nazis (they had a few years reprieve, but they suffered the same fate as Jews who stayed in Berlin).

The US has established the "Northern Command," a new military department that has jurisdiction over Canada, chaired by the same General who supervised the (lack of) air defenses on 9/11. "Northcom" will be able to control Canada, especially in the near future as Canadian natural resources become more critical for the empire (water, oil, natural gas). Second, Canada and the US signed a border agreement after 9/11 that removes Canada as a political haven for draft resisters. It would be easy for this agreement to be extended to political dissidents. Most of the close US allies, especially in the English speaking world and those that are members of NATO, have stated they will not harbor US draft resisters (unlike previous policies during the War on Vietnam).

...Worse, there's probably nowhere on Earth that is far enough away from the consequences of the US sliding into full strength fascism."

We have to do what we can, save what we can of our traditions and culture, protect our land and freedom, knowing we are probably doomed to failure. I am a member of an American Indian tribe, so I well know how it goes. My ancestors went through this before, including my Sauk ancestor Black Hawk. He knew he could not win, but he had to do what he had to do anyways. He was not only defeated and humiliated, even his body was stolen from its grave by American settlers of his homelands in Iowa and Illinois, and his skeleton displayed in a museum...until the museum mysteriously burned down. And the family that stole it were all wiped out by cholera some years later.

There is a video of Johnson describing his books and the decline of empires at:

Anonymous said...

I don't see it as depressing. I see it as very hopeful. There is no way to reform the US, therefore collapse is immanent, and the US empire will end to the vast benefit of the world. What could be better?

Seymour Melman spent his whole career figuring out how to do economic conversion of military industry in great detail. If you seriously want to know read his works.

michigan native said...

Finally, we have one man who seems honest and is warning us that these actions could lead to a police state, Ron Paul. He has many great ideas, but the media has marginalized him and despite straw polls showing him having a wide lead over Romney in Iowa, somehow Ron Paul loses to Romney, but not by much. Begiining to sound familiar, those of you who haven't forgotten Bush's "victory" in Florida? The elections are rigged for whatever candidate will waste the most on military spending.

As such, Ron Paul never stood a chance and even if he did, the system would never allow him to do his job. had he started to succeed, his secret service would have been ordered to step down off the back of his limo just before it made some weird right turn towards a grassy knoll and some "lone nut assasin" will have fired some magic bullet and the history books will be full of lies just as they are now

None of these candidates, with all the hot air that spews from their mouths, can create fossil fuels, oil in particular. Using the military to steal it from other countries is a new energy loss and will no longer work. Like the Iraqis, they will have no delusion s about "liberation" or "humanitarian" missions and likely blow up/set ablaze their own oil wells. Only 10% of the estimated reserves in Iraq were actually viable due to damage from the first and second gulf wars. Read Reinventing Collapse if you haven't yet. At some point, an oil hungry China may step in. They have recently stated that the US must be confronted militarily. How do you spell global thermonuclear warfare?

So sit back, pull up a chair while the greatest show on earth unfolds. Obama or Romney. More senseless military waste, the war machine runs out of gas, and the US collapses into anarchy and martial law. If the Newt Gimgrich types get their way, your life could be in danger for so much as visiting a forum like this or expressing your supposed right to free speech. Kiss the land of the free goodbye. Happy New Years

Scott Supak said...

I had the pleasure of speaking to Chalmers back during the height of Bush's lies to get us into Iraq. I'm sure that he would be happy to see that there are at least some plans to cut back the military, especially the getting away from large land wars as Obama recently announced in his plans for the Pentagon.

Of course, the Republican clown car can't wait to scream about how Obama's endangering us all with his little cuts to their favorite government welfare program.

Some of your readers are hoping for a speedy collapse, but I can't bring myself to hope for something that will negatively affect so many people. Here's hoping that the collapse will be slow, that people will have time to build resilient communities, and that the fascists won't take over in the mean time and force my daughter to give birth to a child she doesn't want, or tell gay people they're second class citizens, or bring back Jim Crow, or God only knows what Mitt Romney has up his sleeve.

Scott Supak said...

OH, BTW, the American Society of Civil Engineers estimates that we need to spend $2.2 Trillion in 5 years. Seems Gary has some old numbers. Further, rich people are so desperate to put their money in something safe that they are willing to pay the government to hold it. These negative real interest rates mean we could borrow money to fix the infrastructure for less than it would cost to simply tax and spend later! Meanwhile, workers and equipment are idle, and materials are cheap. So, we should be borrowing and spending on infrastructure now in order to save a lot of money in the long run.

Regular readers of Dean Baker will also note that there are all kinds of things we could do to improve the economy right now. The fed could pay attention to its dual mandate. The Treasury Department could take unilateral measures to lower the value of the dollar, which would increase exports and decrease imports. We could allow free trade in the medical realm, lowering medical costs, and we could stop handing billions to drug companies with out-of-control patent protections. All kinds of fun stuff that would make the economy better, but none of it gets done because it's all designed to protect rich people. I strongly recommend Baker's free E-book, The End of Loser Liberalism.

michigan native said...

I meant net energy loss and was reacting to recent developments that I feel are cause for great concern. Namely, our "change we can believe in" president signing the "national defense authorization act", which gives the geniuses that run the military the power to arrest and indefinetly detain anyone whom they view as a "threat to national security" without due process, a trial, or access to legal assistance or recourse. Sounds eerily like the death squads that our ever so benevolent CIA funded and trained in El Salvador and other swamps of horror.

The other issue, besides what appears to be an imminent attack on Iran by our "peace candidate" Obama are presidential candidate Newt Gingrich's obsession with blaming marijuanna smokers for all the countries problems. Somehow the counter culture was/is to blame for the empire that is about to collapse under the weight of its own debt. Armed with the national defense authorization act, the Newt Gingich's, Obama's, or Romney types can find sape goats for anyone who diseents, gets vocal, or questions authority. It would seem as if the neocons know collapse is imminent and laying the grounds for the imposition of martial law, fascism is already here and alive and well.

Anonymous said...

I can never understand what planet Scott Supak is living on. The landscape he describes is always radically different than the one I see in America. The America I see has "liberals" and "progressives" stealing more than the Evil Rethuglicans, doing more to hurt the disadvantaged than the Evil Rethuglicans, yet Supak tells us the worst we have to fear is the Evil Rethuglicans.

I wish he were doing satire of a typical Democrat-loving partisan, but it appears he's serious. I would remind Supak that it's been at least 25 years since Evil Rethuglicans ran the entire Federal Government, so I don't understand where he gets his reference points. Is he still living in the 1980s, perhaps? His comments would make a lot more sense if that were the case.

Anonymous said...

Michigan Native,
The NDAA (signed by a "liberal" President) is a perfect example of what Johnson said: An empire and a democracy are mutually exclusive. He said "we have signed a suicide pact for our democracy" as we march into fascism. I find Johnson continues to be right on target.

Kevin said...

@ Gary -

For those of us who happen to live in the USA it is depressing. Most Americans are totally unprepared for serious poverty, psychologically and in practical terms, and many will be utterly unable to cope. You can say we had it coming, and with some cogency too I admit, but the numerous Americans who will soon be surprised by unexpected homelessness and hunger might not have too much trouble answering your question. Moreover people in other deindustrializing nations will likely find themselves in much the same boat.

I was hoping for a somewhat briefer answer than to wade through fifty years of Mr. Melman's opus, but since you mention him I've begun looking him up. It sounds good so far, except that in one article from Columbia University it seems he emphasized in particular the importance of computer-controlled manufacturing. If Dmitry's and others' prognostications about the future of digital technology are accurate, then it may be too late to take that road, even in the unlikely event we smarten up enough to reprogram our military manufacturing computers for civilian purposes any time soon.

Anonymous said...

Remember Melman was writing in the 80's before world oil peak, etc. Had no reason to think about energy shortage affecting digital technology.

At end of the cold war some US military companies were analyzing what commercial products they could build. They didn't have to worry since the "peace dividend" never came.

Having worked in aerospace the main difference is in the culture. Military industry works on cost-maximization, commercial on cost minimization. Other than that cultural difference there is no reason companies can't convert their products. We converted from civilian to war economy during WWII. No reason we couldn't convert the other way.

I am not as pessimistic as Dmitri because of the incredible inefficiency and waste that we currently have. One trillion dollars per year wasted on the useless military, and as Johnson says, "idiots driving Chevy Suburbans with American flags" getting 10 MPG. There is a lot of room for efficiency gains to make up the difference when the US goes bankrupt and/or there is an energy shortage. Surely there are limits to efficiency gains, but we haven't even scratched the surface. Therefore, I am optimistic. Especially if we can cut military spending which is a huge parasite on the economy, "state-socialism" Johnson called it.

Dr. Doom said...

I'm reminded of the story of the tourist asking a Swiss national how their economy worked. He said, "we take in the laundry from the village down the road, and they take in ours." Or something to that effect.

If we cut the waste from the military spending, close plants, recall troops, etc., then those troops, workers and engineers, etc. will be added to the swollen ranks of the unemployed unless there is a new manufacturing economy, complete with new customer markets, ready to take its place. Since these don't exist yet, and with peak everything just around the corner, then we must brace ourselves for higher unemployment or employment in 19th century farming industry, or earlier periods.

Fixing roads and bridges, ports and other infrastructure, while laudable, is just another form of state socialism. Hoover and FDR tried that in the Great Depression, with only limited success. There was still depression until and throughout WWII.

TH in SoC said...

@ michigan native:
Ron Paul is certainly an interesting case, no? As a black man, I find him especially interesting.

There is the troubling matter of a long string of comments and speeches made by him which seek to undermine or reverse all civil rights protections now granted by law to (dark skinned!) minorities in the United States. His words are a matter of public record.

There is the matter of his "cure" for the present problems of the United States, namely, the same old tired cure that Republicans have been hawking for the last thirty years - "the Gummint's the problem, so we need to shrink the Gummint!" That conveniently ignores the following facts:

A. One of the things governments are supposed to do is to protect the weak from the strong. This includes not only ethnic minorities, but also people without wealth, as well as the ecosystems on which we all depend.

B. Protecting the weak from the strong reduces the total loot available to the strong, so the strong (in this case, the very wealthy) have systematically both weakened and bought off our government to serve their interests.

C. The strong are using their media mouthpieces to amplify the distaste many of us without strength feel toward a government that no longer protects us. The message of the strong is, "See, you all are suffering because you rely on a government at all!" The truth is that we all are suffering because the strong have broken the government we had. The aim of some of the strong is to abolish the government entirely. That will leave the weak with no protection against the strong.

Ron Paul is putting on a good show, pretending to be on the side of the weak. Yet if he is actually elected, he will do nothing to enforce legal protections of the weak against the strong. He will do nothing to limit the power of the wealthy and corporations. He will simply be a re-run of the "compassionate conservative" oxymoron that we had with President Bush.

michigan native said...

"It is amazing how many americans feel our problems could be solved if only we elected another president, when in fact, the problems revolve around the presidency itself". The presidency being reflective of the politicial system, which has bought and sold by special interests and is unresponsive to the will of the people.

This is one element of the collapse soup we are going to choke on (again, read Reinventing Collapse). A runaway military budget, ballooning foreign debt, massive trade imbalances, reliance on imports (oil, 60% from governments who hate our government for decades of military bullying), and a systemically corrupt political system that has been owned and controlled by special interests, what Eisenhower warned us about decades ago, the military industrial complex, which he rather dramatically yet accurately describes as a "grave threat to democracy". Others like Michael Parenti give great detail of how the major institutions of the US are in bed with those who profit from war and finance misery and death both at home and abroad. Former CIA agent John Stockwell in his book "In Search Of Enemies" details how the world must be dangerous in order to keep americans in a state of fear in order ton sell them on the enormous sacrifices they must make in order to keep the war profiteers/military industrial complex going. If they knew better, they would revolt

In the proverbial guns vs butter debate, what is left of the resources and capital of the US has been put forth to keep business as usual, to keep the "joy ride" going, based om the false premise that future growth will somehow pay off the unsustainable debt that is being taken on now. The US military and a few other greedy special interests/parasites like the GOP (grand oil party) have become like uncaged monsters, now devouring the very people they are supposed to represent.

Politics and militarism. Toss in energy shortfalls and you can see the death of empire, and the present actions of the empire are the last desperate, not to mention futile, acts of an empire in its death throes. The world breaths a sigh of relief until the new empire rises....unless humanity somehow finally realizes that mutual cooperation with barter based agrarian communities with less resource consumption are in fact the better answer.

Until then, watch hell on earth occur and after the dust settles, those who are left may (or may not) come to their senses and realize that sustainability, rather than endless growth, is the way of the future, the only way.

michigan native said...

@Th in South Carolina. I appreciate your input and have some idea of how you feel. I never said Ron Paul was the answer, in the first part of my post which was rather rude towards religious and social conservatives from the south, which not surprisingly Dmitrty did not post, I went into detail what a joke voting is in general, and took my turns bashing at all the "acceptable" candidates.

I still feel Ron Paul had some great ideas, most notably, scaling back the government and putting an end to the military industrial complex, but his ideas of privatizing medicare and social security gives me the creeps. There is no "free market solution" to environmental destruction and resource extinction so the last, desperate, and admittedly lame hope was that we could collapse with our civil rights upheld, but now that looks like a fantasy, a death wish that will be denied, as we can look forward to a charade that gives us a choice of Obama vs Romney. Like a choice of getting boiled in oil or burned at the stake, take your pick. How about voting for nobody for president in 2012. Whoever is selected will preside over an empire that collapsed, so if you bother to vote, vote for the pig you despise the most

John Hemingway said...

Hi Dmitry,

I was looking at the t-shirt on your site and wondering if your boat is yawl-rigged.


Dmitry Orlov said...

John -

Hogfish is a pretty unique boat, and its rig evolved over time. It started out as a sloop, then sprouted a bowsprit and a genoa, making it a cutter. I am not sure when the mizzen was added, but the builder/original owner sailed engineless for 10 years, and used the mizzen sail to maneuver (pull up to the fuel dock to take on water, etc.) I mostly use it as a sloop (mainsail + genoa), but I am in the process of adding a new staysail and getting the genoa re-stitched so that it's effective reefed, so that the cutter rig becomes effective for windward work. I use the mizzen while at anchor, to keep the boat from swinging. This, it turns out, is very important when living and working aboard in a semi-exposed anchorage. It is, technically, a yawl, because the mizzen is stepped next to the rudder post, but that's a fine distinction.

When people ask me what kind of boat it is, I just tell them it's a Hogfish. It's the only specimen of its species, and it keeps evolving.

Anonymous said...

Dr. Doom,
Good points. One thing you left out, which I remember from Melman's work is that military spending produces the LEAST jobs per dollar. Studies of competitiveness show that the most military spending per GDP have the least competitive economy, and vice versa. Ironically, Germany and Japan had laws written into their constitution after WWII (by us) to limit their military, thus helping to make their economies more competitive.

TH in SoC
The amazing thing is that the repubs and Paul are saying we need LESS government regulation as if the collapse of Wall st. was due to too little regulation, and the people are buying it. See Thomas Franks' new book, Pity the Billionaires.

The problem is not state socialism or state capitalism per se. The problem as Johnson points out is centralized power and authority due to militarism. One solution is devolution and decentralization of authority to the states and localities which will happen with collapse. Neither the democruds nor repukians want that.

Thanks for all the great book suggestions: ie: Baker and Stockwell. Read also William Blum to understand US Empire.

Anonymous said...

I find it interesting that so many write distrusting politicians and the American system quickly grab onto Ron Paul who, most certainly, has a suspicious past. To me he is simply another politician who has identified what many Americans want to hear and is capitalizing on it to the max. Didn't we do this last time?

I figure people are still devoted to the "American system" or if we just elect the right man. What we vote for is the best BSer, the best manipulator. Change will not come until we give up on American mythology. That will take realizing we been BSing ourselves all along. Humbling experience!

Nature Creek Farm said...

So many are so afraid of not having something to do...yet the reality is that MOST of the activity in the U.S. is unnecessary resource waste. 80% of the people own only 7% of the wealth. That means that if we lock up the other 20%, we could leave 97% of the resources in the ground or sell them. Instead, we drive to the mall to buy clothes to drive to the mall, and buy a military machine to protect our right to drive to the mall. Less than 5% of our population is engaged in producing ALL of the food, we have too many houses, and everyone WANTS a job but nobody wants to be useful. That is the story of humanity....see you later, dinosaurs...

Nature Creek Farm said...

"What experience and history teach us is this: that people and governments never have learned anything from history, or acted on principles deduced from it." George Wilhelm Friedrich Hegel