Addicted to war: A tale of three corporations

In the unfolding of the current economic crisis, many are looking to the state for help. There has been a sudden revival of state intervention or Keynesianism. But what kind of state intervention? There is a dangerous pattern, established over years, of corporations in trouble turning to “Military Keynesianism” – producing for sale to the armed wing of the state – as a “quick fix” for deep structural problems. Corporations addicted to war are the worst way to fix economic problems – a “solution” which only accelerates pressures to engage in overseas military adventures.

Some corporations are well-known as being embedded in the Military-Industrial Complex. In Bowling for Columbine, Michael Moore identified Lockheed-Martin as the world’s biggest weapons maker, and in spite of the outrage this created from supporters of U.S. imperialism, his statement is probably true.[1] But there are other corporations which are less well-known as arms-manufacturers. Boeing, for instance, while for a long time a supplier to the Pentagon, is usually seen as a largely civilian corporation – the company of the Jumbo Jet. However, in a dramatic evolution since the early 1990s, Boeing has transformed itself from civilian to military production.

Boeing revealed itself as a major military player in the context of the development of the National Missile Defence (NMD) program – better known as Star Wars. Boeing is the “Lead System Integrator” for NMD “responsible for ensuring that all component NMD parts and systems are developed and integrated successfully.”[2] Pushed to the background by the wars in Iraq and Afghanistan, the time-bomb of NMD is still ticking away in the background. Col-Gen Varfolomey Korubushin, first vice-president of the Military Science Academy in Russia, has said, “If the U.S.A. deploys a national missile defence [system], other nuclear powers may opt for increasing their nuclear missile potential, which will worsen the situation in the world.”[3] He should know. After all, his government is a full participant in this burgeoning arms race, in 2005 successfully testing a “missile with a highly manoeuvrable warhead capable of annihilating the national missile defence (NMD) currently being developed by the Americans.”[4]

Boeing’s NMD role was symptomatic of a deep change in the physiognomy of the company. In the early 1990s, fully 80 per cent of Boeing’s revenue came from its sales of commercial planes – the jumbo jets and other passenger planes that are everywhere in the skies of the world. But in the next two years Boeing suffered a serious decline in revenues. In its annual report for 1995 it explained this decline as “due to fewer commercial jet transport deliveries as a result of economic conditions and airline industry overcapacity in most major market areas of the world,” [5] what Karl Marx called “a crisis of overproduction.”

The company’s solution to this problem was revealed in 1997, with its merger with McDonnell Douglas. The merger was driven by one consideration – while Boeing was in its majority a “civilian” corporation, McDonnell Douglas was one of the Pentagon’s prime contractors. Its 1996 Annual Report “At A Glance” section, proudly proclaimed that it was “#1 military aircraft maker, #2 prime contractor and research-and-development contractor to the U.S. Department of Defense, and #4 NASA contractor.”[6]


The chart here shows its evolution through the 1990s, the percentage of its revenues derived from building military aircraft, missiles and other paraphernalia of the U.S. war machine rising from two-thirds to nearly 80 per cent.[7] Now there are some who would challenge the interpretation of these statistics. McDonnell Douglas, for instance, has three categories and not two: “military aircraft,” “commercial aircraft,” and “missiles, space and electronic systems.” But unless you are a “fly me to the moon” romantic, it is pretty obvious that “missiles and space” production is driven by the needs of a war economy, not by visions of Star Trek exploration. If anything, the emergence of Star Wars should make this abundantly clear.


The second chart reveals the resulting transformation of Boeing. From deriving just 20 per cent of its revenues from arms sales in the early 1990s, by 2004 and 2005, arms sales accounted for 60 per cent of its revenues.[8] From 2005 to 2008 that drifted down again to the 50 per cent mark. But that was before the outbreak of the current crisis. The picture is clear – Boeing has attempted to “solve” the crisis of overproduction that was plaguing it in the early 1990s, by turning to a customer with an eternal appetite for commodities – the Pentagon.

The transition to the war economy has succeeded in slowing Boeing’s decline. (But only partially – In 2003, Boeing had to cede to AirBus its position as the world’s largest airplane manufacturer.[9])

AirBus has unveiled its new, massive A380 airliner – the largest passenger jet ever built – capable, in some configurations, of seating more than 800 people. The plane is designed as a “jumbo-jet killer” to displace Boeing’s big 747 at the top of the commercial airline market. Perhaps then we can look to Europe as a place where business is not driven by militarism. This is in fact how spokespeople for the European Union often market their institutions.

Look more closely. AirBus pushed hard to finish work on the A380 to allow its engineers to turn to building a new military transport plane, the A400M. This massive plane is described by Airbus Military as “the most ambitious European military procurement programme ever undertaken.”[10] One commentator said that this, “the biggest joint venture ever in the European defence industry” was “crucial for the credibility of the European Union’s commitment to strengthen its military capability and coordination.”[11]

“Total firm orders for the A400M stand at 192 aircraft,” according to a leading airforce technology web site. Outside of Europe, South Africa has ordered 14. Malaysia has ordered four which could open the door to sales in other Asian countries.[12] European industry, in other words, is just as capable of playing the war production game as is American.

Perhaps this new militarism is particular to the troubled aerospace industry, desperate for sales in a world saturated with expensive to build and maintain airplanes? Turn your attention to the world’s biggest manufacturing corporation, General Motors. GM, as everyone knows, is in trouble. Its current lurch towards bankruptcy has roots that go back years. By the end of 2004, its debt burden had skyrocketed to a mind-numbing $291 billion.[13] In 2005, it recorded losses totaling $10.6 billion.[14] The vast majority of GM’s earnings came from its finance arm, General Motors Acceptance Corp. (GMAC), but to cover its mounting losses, it reached an agreement to sell 51 per cent of GMAC by the fourth quarter of 2006[15]. This staved off problems for a few months, but they came back with a vengeance in 2007 and 2008. February 2008, GM announced 2007 losses of $38.7 billion “the largest annual loss in the history of the auto industry.”[16]

Business analyst Robert Walberg has a solution. GM must, he says, find a “higher margin business with more promising and stable growth prospects.” That business, of course, is the death business. He doesn’t call it that. The nice word for the death business is “defence contracting”. Such a move into war production “could be a good one for the automaker, just as it was for the jet maker Boeing nearly a decade ago.” Walberg is nostalgic for “the 1940s, when GM delivered more than $12 billion worth of war material.”[17] Walberg doesn’t mention that the 1940s was the decade of the most destructive war in human history.

In this tale of three corporations, we have in outline form some of the key elements in the contemporary U.S. and world economy. Industry cannot survive in its traditional markets. Recurring crises of overproduction are driving debt levels higher and higher. In the search for a reliable consumer of last resort, again and again corporations are driven towards arms production. War requires that states purchase massive quantities of expensive to produce weapons and materiel – and if overproduction is the problem, then war with its infinite destructive potential is “the answer”.

It is an economic solution that clearly carries with it huge political and social risks, and very starkly poses the necessity of finding a political solution. The turn to state intervention into the economy is a welcome reprieve from the decades of neoliberalism. But if that state intervention is the intervention of the warfare state and not the welfare state, the dangers for working people around the world are obvious.

© 2008 Paul Kellogg

References

[1] See for instance Andrea Rothman, “U.S. chief executives, Pentagon brass fail to make Paris show,” Chicago Sun-Times, June 17, 2003, p. 54. Rothman without comment and quite uncontroversially, refers to L-M as “the world’s biggest weapons maker.” But this is for the consumption of the readers of the business press. It is one thing for investors to know the truth about who builds what. It’s a little more awkward when that is made available to the public at large.
[2] Kevin Martin, Rachel Glick, Rachel Ries, Tim Nafziger and Mark Swier, “The Real Rogues: Behind the Star Wars missile defense system,” Z magazine, September 2000.
[3] Cited in “Deploying U.S. national missile defence may trigger arms race – Russian expert,” BBC Monitoring Former Soviet Union, February 27, 2006, ProQuest document ID: 994482301
[4] “Russia has successfully tested a warhead,” The Press Trust of India Limited, November 2, 2005, Gale Document Number: A138245614
[5] Boeing, 1995 Annual Report, www.boeing.com
[6] McDonnell Douglas, 1996 Annual Report, www.boeing.com
[7] Based on McDonnell Douglas, Annual Reports, 1994-1996, 2nd Quarter 1997, www.boeing.com. The figures for 1997 represent revenue for the first half of the year only
[8] Boeing, Annual Reports, 1995-2007, www. Boeing.com . Figures for 2003-2007 updated from “Five-Year Summary (Unaudited),” The Boeing Company 2007 Annual Report, p. 21 . 2008 Figures are annualized approximations based on three quarters of results available at “Boeing Posts Lower Third-Quarter Results on Reduced Commercial Deliveries,” News Release, October 22, 2008
[9] Robert J. Samuelson, “The Airbus Showdown,” Washington Post, December 8, 2004, p. A31
[10] Airbus Military, “Final go-ahead for A400M military airlifter,” Press Release, May 27, 2003, www.airbusmilitary.com
[11] Yacine Le Forestier, “Europe’s military aircraft dream takes wing at last,” AFP, May 27, 2003
[12] “A400M (Future Large Aircraft) Tactical Transport Aircraft, Europe,” www.airforce-technology.com
[13] Daniel Gross, “GM’s Debt Crisis,” Slate, Dec. 21, 2004, www.slate.com
[14] “Management’s Discussion and Analysis of Financial Condition and Results of Operations / General Motors,” www.gm.com
[15] David Streitfeld, “GM Agrees to Sell 51% of Finance Unit,“ Los Angeles Times, April 4, 2006, ww.latimes.com
[16] Associated Press, “GM reports biggest-ever automotive loss,” www.msnbc.msn.com, Feb. 12, 2008
[17] Robert Walberg, “GM’s best offense could be defense,” MSN.com, February 3, 2005, www.moneycentral.msn.com

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