18 July 2013

Why is Boeing Imploding? Part II

Two and one-half years ago, on 11 February 2011, Pierre Sprey and I posted the blog entry, Why is Boeing Imploding?.  This post is still the fourth most popular since I began this website in 2008.  It describes how the corrosive practices of the Military - Industrial - Congressional Complex (MICC) spill over to weaken manufacturing competitiveness in the private sector.   Included in this blog entry was a link to a very revealing internal 2001 Boeing report documenting perils of outsourcing production as a means of increasing profitability to Boeing.  Increased outsourcing was and remains a central tenant of the plan for production of the Boeing 787 program.  

The spillover of MICC’s dysfunctional manufacturing practices into  the private manufacturing sector has a lot to do with America's economic stagnation.  The uncompetitiveness of the defense sector and the dangers of spillover are themes I have addressed repeatedly -- for example, here or here, esp. beginning with 2nd paragraph of pg. 58.  
That the MICC's disfunctional practices would contribute to deindustrialization and the eventual loss of high paying manufacturing jobs was first foreseen and written about in late 1950s by Professor Seymour Melman of Columbia University.  In his prescient book, Profits Without Production (Knopf, 1983), Melman explained why the growing militarization of our economy was one of the central causes of the decline in America’s manufacturing competitiveness and the loss of high wage manufacturing jobs.  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 introduction “How The Yankees Lost Their Knowhow” is worth the price of book. 
Fast forward to July 2013:  My good friend Andrew Cockburn has brilliantly updated the sorry story of Boeing's implosion in an important Harpers essay “How Boeing’s adoption of defense-related contracting practices led to the flawed Dreamliner 787.” 
Read it carefully, because without saying so, Andrew's case study reminds us of the prescient but ignored warnings in Melman’s pathbreaking work in identifying some of the real causes of America’s industrial decline, the loss of high paying manufacturing jobs (plotted in Figures 1 and 2 here), and the rise of inequality -- and now the opportunity costs incurred when a manufacturing company uses DoD outsourcing practices to maximize profits by reducing its own production, while passing the increased risks of air travel onto the customer.