Economic Extortion: A Labor View on Military Spending

Uncle Sam happily cheerfully tossing mini missiles and fighter jets from a basket into the air

Auth for the Philadelphia Enquirer

women marching and holding posters

This article originally appeared in Southern Exposure Vol. 10 No. 6, "Waging Peace." Find more from that issue here.

"As military spending rises higher and higher, we are losing jobs."


Since the Pentagon is the eighth largest nation in the world (its budget exceeds the Gross National Product of 142 nations), we must assume that it will triumph over current adversaries. So our goal — to curb military spending — will not be an easy one.

However, I don't wish only to discuss the Pentagon and its spending habits, but also to tell you why we Machinists [the International Association of Machinists and Aerospace Workers, the IAMAW] support economic conversion. Economic conversion is not a religion. It is a rational, intelligent and absolutely essential way to get a grip on current military madness, promote full employment, reduce inflation and make the commitments necessary to rejuvenate our industrial base and spur productivity.

Let me begin the discussion on two subjects from the Machinists' viewpoint.

First, the impact of military spending. A few years ago, the Machinists Union commissioned Marion Anderson (of "Empty Pork Barrel" fame — see page 68) to survey our local lodges and assess the impact of military spending on our job opportunities and employment. Based on that report, we find that the MX missile development and placement will cost us $100 billion over the next 10 years. If we scrapped the MX and used that $100 billion to invest in a safe energy program, distributing it among the following six development projects, we could eliminate unemployment altogether:

• mass-transit systems — two million jobs;

• railroad rehabilitation: 1.3 million jobs;

• solar energy conversion: 3.5 million jobs;

• solid waste and resource recovery: four million jobs;

• alcohol fuel conversion: seven million jobs;

• energy conservation: a half million jobs.

The cries for the need of the MX missile are as ridiculous as for the B-l. The threat of Russian attack, when in fact they can't even get out of Afghanistan or for that matter get into Poland, is ridiculous. The plain facts are that the cry of war hysteria and the brazen moves by President Reagan are leading us into an equally hysterical spending spree for unnecessary military hardware. This could indeed kick off a holocaust that could eliminate our nation — and even this world as we know it — in a senseless war.


Let's face it: as military spending climbs higher and higher, we are losing jobs in the industry. For example, in 1970 we had 24,000 members at McDonnell-Douglas, St. Louis. Today we have around 11,000, yet prime contract awards to McDonnell-Douglas jumped from $1.4 billion in 1975 to nearly $2.8 billion in 1978, and those figures are continuing to climb at the same disproportionate pace today.

McDonnell-Douglas is currently the second largest prime contractor, behind number one, General Dynamics. Sixty-nine percent of its sales are to the military. Whether we measure the impact of military spending on employment in terms of the total Department of Defense budget, or in terms of prime contract awards, the conclusion is inescapable: increased military spending is costing this nation jobs, is undermining the full employment goal, is perverting the work ethic, and is a drag on productivity.

Moreover, military spending not only generates unemployment, it is also the most inflationary form of federal spending. There are several reasons for this.

First, most military contractors produce on a cost-plus basis. They have no incentive to improve efficiency and cut waste. Contractors get guaranteed profits, no matter what the costs incurred. Because their profits are calculated as a percentage of their costs, their basic incentive is to increase costs, and thus their profits.

Second, resources are used in the production of military hardware and services at the expense of their availability to the civilian sector. Bombs, missiles, submarines and tanks cannot be bought by the public. They add nothing to the supply of consumer goods and cannot be either reused or utilized in the production of other goods. Therefore, the stock of civilian goods and services is reduced and the market prices of raw materials are bid up, thus pushing up prices along the production chain for all goods and services.

Third, the federal government must borrow money in the open market to finance the military. This not only adds to the federal debt, it adds to the interest costs of servicing that debt, and it bids up interest rates — the price of money — which everyone has to pay. Two-thirds of the federal debt is war-related.

Finally, contractors themselves enter the money markets to borrow capital for military production. This reduces the availability of capital for the civilian sector, and gives an additional boost to interest rates.

We found inflation hits our IAMAW members in two ways. The value of members' paychecks is reduced as their raises do not keep pace with inflation. Union members are then forced into a cruel spiral whereby, when they anticipate price rises, they are blamed for causing the inflation, but if they do not anticipate coming price rises in the bargaining sessions, they take a yearly pay cut.

IAMAW members are also hit by inflation through their jobs. As purchases of durable goods and services are the first things that people put off, job opportunities are diminished. When the interest rate goes to 20 percent, the average businessperson is going to think long and hard before investing in new plants and equipment. Machinists, like other union members, are caught in the crunch: higher prices, fewer jobs and more blame placed on unions for causing the problems.

The pre-eminence given to military industry and technology over the last three decades has had a delayed but serious impact upon the civilian industrial economy. In stark contrast to the enormous sums allotted over the years to military technology, civilian technology has been starved for capital, and thus for talent.

Over half of the U.S. scientists and engineers have been working on military and space contracts. This has meant that this great pool of talent has not been available to work on civilian commercial designs and applications of new technology. There is no mystery why the Germans, Japanese and Swedes have pulled equal to or ahead of us in steel, machine tools and electronics. Virtually all their scientists and engineers are working on civilian technology.

As the productivity of our trade rivals rises rapidly while ours stagnates, the costs of our goods, but not their quality, rises. This means that it becomes cheaper for many firms to build factories abroad, or to import finished materials and components. These business decisions also export jobs. The control may rest with American management, but the jobs have been moved to Germany, Taiwan or Korea.


"Defense spending, in an inflationary sense, is the worst kind of government outlay." Wall Street Journal, 1980


Turning to economic conversion, the nation's defense workers face a moral dilemma. They may desire and yearn for peace and an end to weapons production, but they must have employment — a job — to put bread on the table and survive in an imperfect world. What do we do when the defense work stops? When the military base closes? When the weapons system becomes obsolete or phased out, as another is phased in? When the contractor sends the work out to a subcontractor in another state or community? When the Pentagon makes a deal that sends work and technology overseas to NATO and other allied countries?

Let me tell you how the system works now: workers are kicked to the end of the unemployment line. A double standard operates.

Military production workers are pressed into serving the national cause in a manner only a little less authoritarian than the induction of military draftees. In an economy where jobs are scarce — where official government policy calls for chronically high unemployment levels, where local community unemployment rates range from six to 12 percent, and even much higher — no one can sincerely argue that workers have the free choice to forego employment in the defense industry, if that's where the jobs are, if that's the only action in town.


"The greatest threat facing humanity today is the danger of nuclear war. " —United Autoworkers Executive Board, 1982


The military-industrial complex sings the praises of these workers while they're turning out weapon after weapon — makes them feel like national heroes in the fight against the dread red menace — but, when the contract runs out, the work stops. The workers are kicked to the end of the unemployment line. They get no medals, no GI benefits, no job retraining, no severance pay, no relocation allowance and no provision for health benefits to cover their families while they are jobless. They get 80, 90 or 100 bucks a week, and Reagan is trying to take even that away from them. And they get the scorn of society for being out of work. They go to church and hear the work ethic preached at them from the Bible and the pulpit. They go to the unemployment office and are told they won't draw benefits unless they are actually seeking another job and can prove it, the clear implication being that they are lazy creatures loafing on welfare.

They listen to professional economists and the politicians cry about the decline in productivity and plea for a return to the work ethic and a full day's work for a full day's pay. And they stand by and watch as their employer, who has just discharged them into the army of the unemployed, receives a government welfare check amounting to millions of dollars — called an incentive bonus or an indemnity payment — which means the boss — the corporate contractor — gets a payoff from the Pentagon. But the defense workers — the production workers, the engineering staff and technical and professional workers who are laid off — get unemployment compensation, if they are lucky. In the Machinists union, we call this system socialism for the corporation — for the boss — and free enterprise for the workers and employees.

Economic conversion offers a solution, and the problems can be solved. We do not buy the line that says that there is nothing we can do to change things. In order for any conversion program to be successful, there has to be an actual transfer of capital from military to civilian production, and a parallel transfer of skills.

This nation, this government, corporate America, our employers cannot preach the doctrine of the work ethic when there are no jobs in which to work, cannot preach the gospel of free enterprise and the free market when neither exists! Military production is the closest approximation of socialized industry in America. And look who's ripping it off, milking it dry: not the workers, but the employers. It is socialism in reverse. We call it the rise of a corporate state: government owned and controlled by private corporate interests.