Generals over the White House: 4: WAR AND THE ECONOMIC CRISIS


Following up on his bellicose proclamation of the so-called Carter Doctrine, in which he carved out the Persian Gulf as a virtual American lake to be defended with "all the force necessary," President Carter has proposed an unprecedented peacetime defense budget a budget that projects a most dangerous turn towards military brinkmanship.

The "goal of President Carter's proposed defense budget," said the Wall Street Journal of January 29 1980, "is reminiscent of the Cold War of the 1950s rather than the detente efforts of the 1970s." It has been recognized almost universally in the bourgeois camp as a break with the more moderate pace of Pentagon expenditures in the recent past, vast though they have been.

At the time Carter was about to submit his budget message for 1981, there was widespread speculation that a new recession was virtually on the way. Carter was advised to include a prediction that the recession would be mild. The whole idea of an incumbent President officially declaring the onset of a recession is rather extraordinary.


The point of including this prediction, however, was to convey the impression (without saying so) that the defense budget would really cushion a recession and curb unemployment. This idea that military expenditures, especially very heavy ones, can soften or totally avoid a capitalist recession has been a recurrent theme among capitalist economists and has operated as a rationalization over the past three decades for the swollen defense budget.

"Love it or loathe it, the military-industrial complex is back in business," said the New York Times on January 20, 1980, in its business and finance section. The tension in Iran and Afghanistan has given the defense industry a multi-billion dollar shot in the arm and the economic consequences could mean more jobs, higher inflation, a larger federal budget deficit, a strong stock market and an end to recessionary expectations."

The Wall Street Journal of February 1, 1980, was even more explicit in its front-page headline. "Military spending rise," it said, "will soften recession, many economists say."

"Even before the Pentagon decides," said the Journal, "how and where to spend its billions, some defense contractors are expected to begin hiring workers and building inventories in anticipation for contracts. A few companies say they already have. Thus the rising defense bill is likely to give the economy a boost during 1980 as unemployment drops and orders rise."

The business correspondent of the Christian Science Monitor was equally lyrical about Carter's defense budget. The on-again off-again recession now has probably been put on the back burner thanks to the new defense spending that could reach a whopping $230 billion annually by the mid-1980s. At the least, any recession is expected to be sharply mitigated."

What has happened to this rosy picture? Have the unprecedented peacetime defense expenditures wiped out the prospect of a capitalist crisis or cushioned a mild recession as the Pentagon apologists put it?


The Commerce and Labor Department statistics released on May 2 showing a sharp drop in production and a steep increase in the unemployment rate to 7.2% completely exploded the myth that only a mild recession was coming. They fully confirmed that the serious capitalist crisis which has already been on for some time is still deepening. The more sober of the capitalist economists are predicting that it will be of considerable duration.

Pentagon apologists are quick to show that there's a considerable "lead" time between orders and the actual production or build-up of inventories. That may be true. However, some of these orders have been on the drawing board ever since November 4, 1979, the date when the U.S. Embassy personnel were 4, 1979, the date when the U.S. Embassy personnel were seized in Iran, and others since long before then.

Of course, increased military production can stimulate and absorb a good deal of the basic industrial apparatus of the country, especially if it is followed by a general mobilization of the whole national economy. However, it should be noted that military production if it is relied on as a stimulant and administered over a protracted period as it has been in the U.S. for more than three decades, like any other stimulant ultimately turns into its opposite and becomes a devastating depressant. What is true about drugs in general is also true in the field of political economy.


It was, of course, the huge military program that the U.S. embarked upon in the early thirties that ultimately pulled this country out of the most devastating economic collapse it has ever experienced. There are, however, vast differences between the early thirties and today.

There were at that time millions upon millions of unemployed. Industry and commerce were stagnant, some at a virtual standstill. There was not much of a standing U.S. army or navy. There was no universal military service as yet.

Most striking of all was the prevalence of a worldwide capitalist deflationary cycle. Prices of most basic commodities had not only reached low points but were at rock bottom. The huge drop in worldwide prices subsequently entailed a trade war which later took on the form of currency wars among the capitalist powers.

As against the conditions prevailing then, the prospect today of revitalizing the economy through militarization on a truly massive scale is wholly different. Instead of a vastly deflated capitalist economy, there is today a grossly inflated one.


The World Bank reports that in 1977 as many as 125 nations in the capitalist world were suffering from inflation. For the years 1970-77, the average annual rates ranged from 4 to 7% for a dozen or so so-called low-income countries, to Argentina's 107.3% and Chile's 267.8%. Most countries suffered rates of 20 to 30%. Even OPEC nations had high rates of inflation for the period: Saudi Arabia, 32.9%; Libya 25.1%; Kuwait, 31.3%.

If the U.S. were to seriously attempt to try to reduce inflation it could scarcely proceed at a time when on a world scale it has, with slight ups and downs, been generally on an increase, as we have just shown.

Both the worldwide inflationary spiral of today as well as the deflationary period of the early thirties are merely different manifestations of the same intractable capitalist disease, in which production is destined for a blind market, for profit and not for human use.

This capitalist disease has also grown out of the tremendous worldwide military expenditures, incurred mostly by the U.S., which has exported devalued, inflated dollars in the billions abroad.

It is also fueled by the growing power of the multi-national corporations and the control they exercise over the world capitalist market in basic raw materials as well as finished industrial products.


The phenomenon of sharp oil price increases is fueled only marginally by the changed political conditions in the Middle East and elsewhere. The main cause is the vise-like grip of the U.S.-British-controlled oil monopolies, which in turn are closely aligned with and part and parcel of the military-industrial complex.

The new militarization envisioned by the Carter defense program, unlike during the thirties, comes on top of a bloated military establishment which has milked the country of hundreds and hundreds of billions as a result of the Viet Nam war. To this must be added the broad sociological significance of military production in capitalist society.


Military production in the epoch of imperialism is a special case of commodity production. "The wealth of those societies in which the capitalist mode of production prevails," wrote Marx in his opening chapter of Capital, "presents itself as 'an immense accumulation of commodities.' " The products of the military-industrial complex are by Marxist definition commodities. However, in addition to having an exchange value, commodities must also have a use value. According to Marx, a commodity is "a thing that by its properties satisfies human wants of some sort or another."

The products of the military-industrial complex enter into the process of capitalist production not as commodities in general but as commodities sui generis they are commodities of a peculiar type. While they are use values in the narrow economic sense, their broad sociological significance is that of a cancer which tends to consume the entire body politic.

The process of capitalist production and exchange in the final analysis does mean that the capitalist, in order to realize his profit, must produce a useful product. If not, it undermines the very process of capitalist reproduction.

The sum total of the product that emanates from the military-industrial complex is devoid of usefulness to society. This is not readily apparent in the U.S., which was the victorious country in World War II. At the end of the war, after having spent billions and billions of dollars, the U.S. appropriated most of the profitable world markets and sources of scarce raw materials which had belonged to its allies and its adversaries, thereby vastly enriching monopoly capitalism at home.

However, since the Korean war, the U.S. imperialist establishment has consistently lost ground in its military adventures It has flooded the U.S. as well as the rest of the world with small pieces of paper whose decreasing value gives evidence of the indebtedness it has incurred as a result of military adventures for which there has been no material return to compensate for the vast expenditures entailed in producing the planes, guns, tanks, and other sophisticated equipment employed.


A vivid example of the predicament in which the military establishment finds itself was illustrated in the segment of CBS's Sixty Minutes on May 4, 1980, in which it was alleged by the former U.S. Ambassador to Saudi Arabia, James Akins, that then Secretary of State Kissinger not only did not try to discourage the shah of Iran from raising oil prices in 1974, but actually encouraged him to do so.

This may astonish many who are not acquainted with the problems of the military-industrial complex. Iran and several of the other oil producers were among the few underdeveloped countries that could be induced to buy high-priced, sophisticated weapons in abundance and could pay for them in good currency, gold or oil.

It was an ideal way of actually selling weapons instead of merely dumping them on reluctant allies or satellites.

Cranking up the war machine in the very early thirties was a stimulus to the capitalist economy. Cranking it up again in a period of hyperinflation and worldwide capitalist stagnation will operate as a depressant instead.

Of course, it is always possible to gain an initial spurt in a segment of industry, but it surely is at the expense of the broader non-defense sector of the U.S.


Notwithstanding all that has been said about the continuing encroachment of the military into all phases of civilian life, isn't it true that Congress and the President have the final say in all matters concerning the political, economic, and military direction of the U.S. government?

Isn't it a fact that Congress, and in particular its powerful Appropriations Committee in the Senate and the Ways and Means Committee in the House, wield vast authority since they have the power of the purse?

It is they, together with the President, who control the funds that have to be allocated for the military, without which no military establishment could develop on such monstrous proportions as today or prosecute a war. In that sense are they not the final authority?

Now listen to an old-line, conservative, southern Democrat, speaking in January 1967 about how the U.S. budget is really made up. Senator Ellender of Louisiana said:

"The truth of the matter is that in many important respects, the Congress and the nation are in the hands of the military. Add to this group the Department of State and you have a combination that calls the shots. The Admirals and the Generals strongly backed by the Department of State seem to have the ways and means of getting just about what they want regardless of the monetary difficulties afflicting the nation.

"In contrast to the immensity of a $75.5 billion budget for the military, we need only take a glance at the budget estimates for the conservation and development of our natural resources. We find here a national commitment of only $2.5 billion. It is to the conservation of its land and water that the nation must look if we hope to remain strong and prosperous in the decade ahead, but our investment in this field will represent only a tiny portion of the huge sums to be expended during fiscal 1968." (From Seymour Melman's Pentagon Capitalism.)

All that has to be changed today in this statement is to raise the figure of $75.5 billion to Carter's projected defense budget for fiscal 1981 of $160 billion. Cuts in environmental and social services are of a commensurate character.

Senator Ellender's testimony is significant not only because of his long years of tenure in the Senate but also because he was regarded by his conservative colleagues as above suspicion. Thus it was in 1967, one year before the Tet Offensive confirmed the U.S. military debacle in Viet Nam.

The ease with which Carter is pushing through this monumental war budget not only fully confirms the predominant role of the military but underlines once again the dangerous road on which the U.S. government has embarked.

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