30 November 2012

Why Israel Did Not Win

With the exception of his problematic reference Iron Dome missile defense system (notwithstanding all the hype, school is still out on its performance, IMO), the attached opinion piece by Adam Shatz in the London Review of Books is an excellent summary of the grand strategic ramifications of Israel's recent dustup with Hamas in Gaza. (New readers: the criteria for a sensible grand strategy are explained here.) 

Israel's grand strategic position was further weakened by yesterday's overwhelming vote in the UN to grant "non-member observer state," similar to that of the Vatican. This resolution upgraded Palestine from its toothless observer status.  Among other things, it grants Palestine the right to accuse Israel of war crimes in the International Criminal Court (ICC) at the Hague. According to a secret State Department diplomatic cable (Feb 2010) released by wikileaks, Israel's fear of such a charge was one reason Israel opposed Palestinian statehood (and presumably this resolution as well):

"Summary: IDF Military Advocate General Mandelblit updated the Ambassador on February 17 on the progress of investigations into allegations of misconduct during Operation Cast Lead, including providing a preview of additional findings to be published before the March 24 Human Rights Council meeting. Mandelblit noted concern with the Palestinian Authority's effort to undermine Israel through the International Criminal Court and hoped the U.S. would weigh in with both the PA and the ICC, and publicly state our view of the ICC's lack of jurisdiction. He warned that PA pursuit of Israel through the ICC would be viewed as war by the GOI. No decision had been made regarding an independent commission to review the IDF investigations. Mandelblit noted what he viewed as the lack of political and popular will to initiate such an inquiry at this time, and suggested that given differences of opinion within the government, the question would be held in abeyance as his investigation progressed. End Summary." 
So, the grand strategic sands are shifting, as described below.  Yesterday's UN vote reinforced this shift.  It remains to be seen if Israel would still consider the ICC option to be an act of war, should the Palestinians decide to invoke it, not to mention whether or not the United States would stand by Israel, if Israel acted on such a consideration.


Why Israel Didn’t Win
Adam Shatz, London Review of BooksVol. 34 No. 23 · 6 December 2012
The ceasefire agreed by Israel and Hamas in Cairo after eight days of fighting is merely a pause in the Israel-Palestine conflict. It promises to ease movement at all border crossings with the Gaza Strip, but will not lift the blockade. It requires Israel to end its assault on the Strip, and Palestinian militants to stop firing rockets at southern Israel, but it leaves Gaza as miserable as ever: according to a recent UN report, the Strip will be ‘uninhabitable’ by 2020. And this is to speak only of Gaza. How easily one is made to forget that Gaza is only a part – a very brutalised part – of the ‘future Palestinian state’ that once seemed inevitable, and which now seems to exist mainly in the lullabies of Western peace processors. None of the core issues of the Israel-Palestine conflict – the Occupation, borders, water rights, repatriation and compensation of refugees – is addressed by this agreement.
The fighting will erupt again, because Hamas will come under continued pressure from its members and from other militant factions, and because Israel has never needed much pretext to go to war. In 1982, it broke its ceasefire with Arafat’s PLO and invaded Lebanon, citing the attempted assassination of its ambassador to London, even though the attack was the work of Arafat’s sworn enemy, the Iraqi agent Abu Nidal. In 1996, during a period of relative calm, it assassinated Hamas’s bomb-maker Yahya Ayyash, the ‘Engineer’, leading Hamas to strike back with a wave of suicide attacks in Israeli cities. When, a year later, Hamas proposed a thirty-year hudna, or truce, Binyamin Netanyahu dispatched a team of Mossad agents to poison the Hamas leader Khaled Meshaal in Amman; under pressure from Jordan and the US, Israel was forced to provide the antidote, and Meshaal is now the head of Hamas’s political bureau – and an ally of Egypt’s new president, Mohamed Morsi.
Operation Pillar of Defence, Israel’s latest war, began just as Hamas was cobbling together an agreement for a long-term ceasefire. Its military commander, Ahmed al-Jabari, was assassinated only hours after he reviewed the draft proposal. Netanyahu and his defence minister, Ehud Barak, could have had a ceasefire – probably on more favourable terms – without the deaths of more than 160 Palestinians and five Israelis, but then they would have missed a chance to test their new missile defence shield, Iron Dome, whose performance was Israel’s main success in the war. They would also have missed a chance to remind the people of Gaza of their weakness in the face of Israeli military might. The destruction in Gaza was less extensive than it had been in Operation Cast Lead, but on this occasion too the aim, as Gilad Sharon, Ariel’s son, put it in the Jerusalem Post, was to send out ‘a Tarzan-like cry that lets the entire jungle know in no uncertain terms just who won, and just who was defeated’.
Victory in war is not measured solely in terms of body counts, however. And the ‘jungle’ – the Israeli word not just for the Palestinians but for the Arabs as a whole – may have the last laugh. Not only did Hamas put up a better fight than it had in the last war, it averted an Israeli ground offensive, won implicit recognition as a legitimate actor from the United States (which helped to broker the talks in Cairo), and achieved concrete gains, above all an end to targeted assassinations and the easing of restrictions on the movement of people and the transfer of goods at the crossings. There was no talk in Cairo, either, of the Quartet Principles requiring Hamas to renounce violence, recognise Israel and adhere to past agreements between Israel and the Palestinian Authority: a symbolic victory for Hamas, but not a small one. And the Palestinians were not the only Arabs who could claim victory in Cairo. In diplomatic terms, the end of fighting under Egyptian mediation marked the dawn of a new Egypt, keen to reclaim the role that it lost when Sadat signed a separate peace with Israel. ... continued ....

16 November 2012

Will Military-Industrial-Congressional Complex Heave the Middle Class Off the Fiscal Cliff?

America’s Defense Dependency

[note: a shorter version of this posting appeared on 13 Nov 12 at this link]

The essay — America the Third World Nation in Just 4 Easy Steps, (Truthout, 10 Nov 2012) — describes how our political addiction to the free-trade ideology of neoliberal economics has helped to de-industrialize America and thereby impoverish much of the American middle class. My 24 Sept essay in Counterpunch describing decline of manufacturing employment gives you a sense of the mind-boggling magnitude of what has happened. While “4 Easy Steps” makes passing references to the increasing dependence of the manufacturing sector on military spending, as well as the financialization of economy (but not the latter’s siamese-twin ‘managerialism’), the authors did not develop these points. Without implying any criticism of their excellent essay, my aim today is to tweak your interest in these omissions, particularly America’s defense dependency.
The late Professor Seymour Melman (Columbia Univ.) wrote a prescient book, Profits Without Production (Knopf, 1983) that explained how the militarization and managerialization of our economy were becoming the central causes of the decline in America’s manufacturing competitiveness.  This decline started in  the 1970s, but Melman showed how it grew out of seeds planted by the permanent military mobilization of a huge defense industry in the 1950s.
The permanent war economy was born on 30 September 1950.  On that day, President Truman officially signed NSC-68, a document that became the blueprint for the containment strategy for waging the Cold War.  Central to this strategy was the  establishment of a large, permanently mobilized defense manufacturing sector. The authors of NSC-68 justified the permanent mobilization, in part, with an economic rationalization reflecting their contention that the WWII production miracle proved the multiplier effects of Military Keynesianism.  They suggested these benefits were likely to repeat themselves.  In their words: “the economic effects of the [NSC-68] program might be to increase the gross national product by more than the amount being absorbed for additional military and foreign assistance purposes.”
The post WWII economic boom in the US (note: our competitive performance was aided in part by the lingering effects of the WWII  damage to the US’s other major industrial competitors) hid the adverse economic effects of the economic diversion attending to the permanent war economy unleashed by NSC-68.  Nevertheless, by early 1961, the accumulating economic and political damage caused by the diversion concerned some insiders: President Eisenhower famously warned the nation about the rise of misplaced power posed by the rise of a large permanent standing arms industry, which he said pointedly was new in our national experience.
The accumulating damage wrought by the permanent war economy  started to accelerate in the 1970s, and by 1980, the cancer metastasized: militarization and managerialization began to openly thrive and grow at the expense of the traditional high-wage manufacturing sector, in effect, siphoning off money flows via a combination of government handouts and favorable tax treatment that in effect rewarded both the looting of the tax base and the draining of competitiveness and ingenuity from the civilian manufacturing sector (via the increased defense subsidy, leveraged buyouts, offshoring of jobs, emphasizing short-term focus to pump stock prices, etc.) The combined results of the growing defense dependency, managerialization, and financialization was a decreasing international competitiveness in the manufacturing sector. At the same time, our global competitors were increasing their competitiveness.  The net effect can be seen in the US merchandize trade deficit; it went into free fall after 1980.
Those who believe that subsidized defense technologies spill over into the commercial sector to improve international competitiveness might want to consider the obvious fact that the huge increases in the defense spending between 1977 and 1987 and 1998 and 2012 clearly did nothing to ameliorate the free fall.
In America, this political-economic evolution has created a weird political situation where a peculiar political darwinism (taking the form of a corporatist alliance of big business and the federal government) co-exists with the neo-liberal ideology of social darwinism. The former stresses mutual dependency and government subsidies for survival while the latter stresses individuality and survival of the fittest in a Hobbesian Universe.  Yet the contradiction between the two modes of belief does not impede the ideologues from promoting both simultaneously, and in so doing, continue the looting and draining operations.
That cognitive dissonance  is now poised to grow much worse in the next few months, if as is likely, the threat of a budget sequester induces the government to impose neoliberal austerity economics on the middle class, while government becomes more imbedded with and protects the banksters, the defense contractors, and its other corporatist allies.  That is because the only way to practice America’s peculiar mix of social and political darwinism at the same time is to fling what is left of the middle class off the fiscal cliff by defunding social security, medicare, infrastructure modernization, education, etc.
Much has been written on the economic distortions created by the financialization of the economy, but aside from Melman’s pioneering work, little has been written on economic distortions created by the increasing dependency of the manufacturing sector on military spending — which is really a huge government subsidy – and the rise of managerialism, financialization’s deadly siamese twin.  Both sets of distortions  exist side by side with, but in sharp contrast to, the ideological neoliberal fantasies of a free market.
The attached graphic provides a hint — but only a hint — of how the hidden distortions that have been insensibly creeping into the economy: the graphic illustrates how rates of growth in the industrial shipments of military durable goods increased at a much faster rate than shipments of nonmilitary durable goods  since 2000.
This difference in growth rates reflects the accumulating effects of the huge increases in the defense budget that began in 1998.  These differences have worked to increase the disproportionate large share of the de-industrializing manufacturing economy that has been soaked up by the defense industry over time.  For example, defense spending (base budget + war costs) in 2011-12 amounted to about 4.4% of the GDP.  About one-quarter of this spending was applied to the salaries of military and civil servants.  That implies the other three-quarters or about 3.3 percent of GDP was spent on defense goods and services in the private sector.  Yet this 3.3 percent of GDP spent on defense goods and services soaked up 11 to 12 percent of America’s total capital goods shipments over the last two years.
There are other indicators of the economic distortion caused by the defense dependency: For example, fifty-five percent of the federal R&D budget is now allocated to defense-related activities. In the early to mid 1990s, nationwide employment of scientists and engineers in the defense sector soaked up about 30 percent of the total scientific and engineering talent (public and private sectors).  Given the rapid growth in the defense budget and the decline in the manufacturing share of GDP since then, the ratio is likely to be even higher today.  Unfortunately, there is little current academic research aimed at understanding the size and meaning of these hugely important preemptions of resources, production capabilities, and human skills.
Indeed, most contemporary economists, like the authors of NSC-68, still think of military spending in Keynesian terms as being a general economic stimulus and job creator.  But Military Keynesianism, if it ever worked, is certainly not working in the 21st Century.
To wit: the largest sustained increases in the defense budget since the end of WWII began in 1998, but this spending binge was accompanied by (1) a sluggish recovery from the March-November 2001 recession to the onset of the Great Recession that began in late 2008 and its even more sluggish recovery; (2) an acceleration in the rate of decline of employment in the manufacturing sector after 1998 (see Figure 2 here); and (3) the unprecedented plummeting of the merchandise trade balance (discussed earlier). There is also academic research suggesting defense spending is one of the least effective way to create jobs via the ‘Keynesian multipliers’ flowing out of government expenditures (see this Univ. Mass study, for example).
Nevertheless, lest you think the NSC-68s faith in Military Keynesianism is forgotten ancient history, President Bush was still spouting its soothing nostrums as recently as February 2008,  when he told NBC’s Ann Curry, “I think actually, the spending on the war might help with jobs. … because we’re buying equipment, and people are working. I think this economy is down because we built too many houses.”
Defense companies now make up a very substantial part of America’s much diminished industrial base — and these giant defense companies are hooked on the narcotic of defense spending.
That is to say, defense manufacturers cannot survive without the defense subsidy.  Since the end of the Viet Nam War, many have tried to convert some of their efforts to competitive production of non-defense goods, and most have failed. One of the most spectacular flops being Grumman’s attempted diversification into hi-tech flexible buses for New York City’s Metropolitan Transportation Authority. The buses had to be withdrawn from service after only three years, because they broke down repeatedly.  As Melman explained in the early 1980s, defense companies simply do not have the marketing, managing, engineering, and manufacturing skills to compete successfully in global commercial markets; and when their business practices spill over into the private sector, they often hurt competitiveness and productivity.*
By 1990, even the industrial leaders in the Military-Industrial-Congressional Complex (MICC) fully understood Melman’s point.  No less an authority than William Anders, CEO of General Dynamics publicly admitted to the truth of Melman’s argument in 1991, when he explained the reasons for the high failure rate in excursions into competitive commercial markets.  Anders said (pg. 13),
“This isn’t surprising. Defense industry management teams generally have little commercial experience and market savvy. Most have been ‘cost plus’ and ‘mil spec’ trained. In short, most don’t bring a competitive advantage to non-defense businesses. Frankly, sword makers don’t make good and affordable plowshares.”
That, in a nutshell, is why Grumman could not make reliable and affordable buses.  That is why the private sector made the internet affordable, reliable, and easy to use, not the DoD which invented it.  For interested reader, the essay Why Boeing is Imploding provides a stunning example of how the defense-related engineering and production practices (in this case, political engineering or the  practice spreading subcontracts around to build political support for a program) have spilled over to infect Boeing’s civilian production practices.
One thing Anders did not mention is that the defense industry is very skilled in lobbying the federal government to increase the public subsidy for making its increasingly unaffordable weapons.  Nor did he mention that you buy what you subsidize.  In a ‘cost-plus,’ ‘mil-spec’ed,’ single-buyer economy, you subsidize cost growth, so you ‘buy’ costs — the cost overruns in the hugely expensive F-35 Joint Strike Fighter being an outstanding current example (here is just one example in the F-35’s ever growing shop of horrors).
Anders made his amazing admission in the 1991 keynote address to the twelfth annual conference sponsored by Defense Week, then a very influential newsletter in the MICC.  His intent was to explain why, at the end of the Cold War, General Dynamics had chosen not to diversify its business into the non-defense sector — i.e., why GD was not interested in converting swords into plowshares.  Instead, Anders proposed to undertake a takeover strategy to increase its market share in a (temporarily, as it turned out) shrinking defense market.
Anders was not alone in thinking along these lines. In fact, his speech was a precursor to the industry-wide, government-subsidized “Pac-Man” consolidation strategy. This strategy was promoted by President Bill Clinton’s then deputy secretary of defense, William Perry, at a 1993 meeting with the defense titans, a meeting dubbed the “Last Supper.”  Perry’s strategy led to a rash of industry-wide mergers beginning in the mid-1990s.
Significantly, when the defense budget began to grow rapidly after 1998, there has been no undoing of the consolidations, even though rising defense budgets eventually grew to levels exceeding the highest budgets of the Cold War, even after removing the effects of inflation.
Today, the defense industry is dominated by three giant all-purpose weapons manufacturers—two of which now have their headquarters in the Washington, DC, area, and the third (Boeing) with a major government relations office in the DC area as well—to more closely supervise their most important corporate activity: the lobbying efforts that influence the money flow out of the Pentagon, Congress, and the White House.
Together with the banksters, these immensely powerful companies, their smaller brethren, and the huge supporting cast of gucci-shoed K Street lobbyists, pro-defense think tanks, and the defense trade press are poised to pounce on President Obama and Congress to protect their fiscal honey pot, while the rest of country is heaved over the fiscal cliff.
If you want to learn more about the important but little examined subject of the economic distortions caused by the defense dependency, and by extension, learn more about why America is becoming a third world nation, the best introduction is still Melman’s** elegantly argued eleven-page prologue to Profits Without Production, aptly titled  ”How the Yankees Lost Their Know-how.”
If that essay does not peak your interest in this hugely important subject, nothing will.  Unfortunately, you will have to go a used bookseller to find it.
Franklin “Chuck” Spinney is a former military analyst for the Pentagon and a contributor to Hopeless: Barack Obama and the Politics of Illusion, published by AK Press. He be reached at chuck_spinney@mac.com
* At this point, I should note that Melman believed it was possible to convert defense manufacturers to civilian production on a large scale, but such a massive conversion program would require large scale government sponsored industrial planning.  This kind of planning is a highly toxic subject to believers in free-market capitalism.  So, it should not be surprising that military conversion — i.e. turning swords into plowshares — is not only an exceedingly complex but also a highly controversial subject. The possibility or impossibility of conversion is not at issue in this essay.  My focus is on the short term response of any grand bargain to dodge the effects of the looming budget sequester: namely how in the next few months the defense dependency may induce the politicians, who have been captured by it, to fling the middle class off the fiscal cliff (i.e., by cutting back expenditures for Social Security, Medicare, Medicade, infrastructure modernization, education, etc.)
** Caveat emptor: Melman was my friend and I made some minuscule contributions to the research in this book.