The Pentagon’s Industrial Policy

His plan is now visibly taking shape — one we can see and assess thanks to a Pentagon-led study with a distinctly tongue-twisting title: “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States.” The analysis is the brainchild of Trump’s adviser for trade and manufacturing policy, Peter Navarro, who happens to also be the key architect of the president’s trade wars.

Navarro, however, can hardly take sole credit for the administration’s latest economic plan, since the lead agency for developing it was also the most interested of all in the project, the Pentagon itself, in particular its Office of Defense Industrial Policy.  In addition, those producing the report did so in coordination with an alphabet soup of other agencies from the Department of Commerce to the Director of National Intelligence.  And even that’s not all.  It’s also the product of an “interagency task force” made up of 16 working groups and 300 “subject matter” experts, supplemented by over a dozen industry “listening sessions” with outfits like the National Defense Industrial Association, an advocacy organization that represents 1,600 companies in the defense sector.

The essence of the Pentagon’s scheme for making America safe for a never-ending policy of war preparations (and war) is to organize as much of the economy as possible around the needs of military production. This would involve eliminating what Navarro describes as the “300 vulnerabilities” of the defense economy — from reliance on single suppliers for key components in weapons systems and the like, to dependence on foreign inputs like rare earth minerals from China, to a shortage of younger workers with the skills and motivation needed to keep America’s massive weapons manufacturing machine up and running. China figures prominently in the report’s narrative, with its trade and investment policies repeatedly described as “economic aggression.”

And needless to say, this being the Pentagon, one of the biggest desires expressed in the report is a need for — yes, you guessed it! — more money. Never mind that the United States already spends more on its military than the next seven nations in the world combined (five of whom are U.S. allies).  Never mind that the increasein Pentagon spending over the past two years is largerthan the entire military budget of Russia.  Never mind that, despite pulling tens of thousands of troops out of Iraq and Afghanistan, this country’s spending on the Pentagon and related programs (like nuclear warhead work at the Department of Energy) will hit $716 billionin fiscal year 2019, one of the highest levels ever. Face it, say the Pentagon and its allies on Capitol Hill, the U.S. won’t be able to build a reliable, all-weapons-all-the-time economic-industrial base without spending yet more taxpayer dollars.  Think of this as a “Pentagon First” strategy. …

Industrial policy should not be a dirty word.  The problem is: the Pentagon shouldn’t be in charge of it.  The goal of an effective industrial policy should be to create well-paying jobs, especially in sectors that meet pressing national needs like rebuilding America’s crumbling infrastructure and developing alternative energy technologies that can help address the urgent dangers posed by climate change. …

Where could alternatives to Pentagon job-creation programs come from?  The short answer is: invest in virtually anything but buying more weapons and waging more wars and Americans will be better off.  For instance, Pentagon spending creates startlingly fewer jobs per dollar than putting the same taxpayer dollars into infrastructure repair and rebuilding, alternative energy creation, education, or health care.  A study conducted by University of Massachusetts economist Heidi Garrett-Peltier for the Costs of War Project at Brown University found that, had the government invested in civilian activities the $230 billion per year wasted on America’s post-9/11 wars, that sum would have created 1.3 million additional jobs.  A more equitable tax policy that required wealthy individuals and corporations to pay their fair share could similarly fund a $2 trillion infrastructure program that would support 2.5 million new jobs in its first year, according to a proposal put forward by the Congressional Progressive Caucus.

As for the president’s much touted, dramatically overblown claims about the jobs to be had from arms exports, the global arms market represents only a tiny fraction of the growing market for renewable energy technologies. If the goal is to produce jobs via exports, developing technologies to tap the huge future market in renewables, which one study suggests could hit $2.1 trillionby 2025, would leave weapons systems in the dust. After all, that’s about 20 times the current size of the total global arms trade, which clocks in at about $100 billion annually. But an analysis by Miriam Pemberton and her colleagues at the Institute for Policy Studies indicates that the United States spends 28 times as much on its military as it does on genuinely job-creating programs designed to address the threat of climate change.

But let’s give the weapons sector some credit.  Its CEOs are working assiduously to build up local economies — overseas.  Saudi Arabia’s long-term economic plan, for instance, calls for 50% of the value of its weapons purchases to be spent building up its own military industry.  U.S. weapons giants like Raytheon and Lockheed Martin have been quick to pledge allegiance to that plan, setting up subsidiaries there and agreeing to have systems like helicopters assembled in Saudi Arabia, not the United States. Meanwhile, Lockheed Martin is helping the United Arab Emirates develop the capability to produce robot-controlled machine tools that are in great demand in the defense and aerospace industries.  And the F-35 program is creating production jobs in more than a dozen countries, including assembly plants in Italy and Japan.

Raytheon CEO Thomas Kennedy summed up this approach when he discussed his company’s growing partnership with Saudi Arabia: “By working together, we can help build world-class defense and cyber capabilities in the Kingdom of Saudi Arabia.” And keep in mind that these are the jobs from so many of those Saudi weapons sales that President Trump keeps bragging about.  Of course, while this may be bad news for American jobs, it works just fine as a strategy for keeping the profits of U.S. arms makers stratospheric.