American Capitalism in Decline
On December 30, 1917 Seymour Melman was born in New York City. The 100th anniversary of his birth helps bring his intellectual legacy into focus. Melman was the most significant reconstructionist thinker of the 20th Century, championing alternatives to militarism, capitalism, and social decay by advancing a systematic counter-planning program for disarmament and economic democracy. His legacy remains of critical importance because today the United States is currently a society in which the economic, political and cultural systems are spiraling into an abyss. Economic and social reconstruction is the idea that planned alternatives to the incumbent mechanisms for organizing economic, political and cultural power exist in alternative institutional designs and matching systems to extend these designs.
The economic realities are well-known, defined by an economic system in which the richest 1% of the population controlled 38.6% of the nation’s wealth in 2016 according to the Federal Reserve. The bottom 90% controlled only 22.8% of the wealth. This wealth concentration is well-known and is linked to financialization of the U.S. economy which is matched by deindustrialization and the decline of the “real economy.” Melman analyzed this problem tied to Wall Street hegemony and managerial attacks on worker’s power in his classic 1983 study Profits without Production. Here Melman illustrated how profits –and thus power—could be accumulated despite the decline of industrial work and manufacturing. In fact, the rise in administrative overheads associated with the over-extension of managerial power actually helped reduce both the competiveness and competence of U.S. firms.
In politics, the Republican Party has emerged as a Trojan Horse society, helping to defund the welfare state and advancing the aims of the predatory warfare state. The 2018 defense bill signed by President Trump allotted about $634 billion for core Pentagon operations and allotted an addition $66 billion for military operations in Afghanistan, Iraq, Syria and elsewhere. More money was available for troops, jet fighters, ships and other weapons, even though there are millions of U.S. citizens living in poverty (40.6 million in 2016). Melman addressed the problem of the enduring post-war militarism of the U.S. in perhaps his most famous book, The Permanent War Economy, first published in 1974. The subheading of that book was “American Capitalism in Decline.” This economy emerged as way to consolidate the military largess bestowed on aerospace, communications, electronics and other war-serving industries, not to mention universities, military bases and associated institutions serving the military economy. This corporatist system, linking the state, corporations, trade unions and other actors was described by Melman in Pentagon Capitalism: The Political Economy of War, a 1971 book which showed how the state was the top manager who used its procurement and managerial power to direct these various “sub-managements.”
In culture, we see the reign of post-truth politics, in which politicians knowingly lie in order to advance political objectives and ideology makes facts irrelevant. A report by David Leonhardt and colleagues in The New York Times found that “in his first 10 months, Trump told nearly six times as many falsehoods as Obama did during his entire presidency.” The problem, however, is that the underlying system of U.S. governance has been based on many bipartisan myths. Melman’s career was based on trying to uncover such myths.
One such myth embraced by both the Republican and Democratic Parties was the idea that military power can be used without any limits. In Vietnam, Iraq and Afghanistan, the U.S. tried to defeat guerilla operations in which the opposing military was embedded in civilian zones. Attacking such areas deflated the U.S. military’s legitimacy with the projection of military power undermining U.S. political power in the region being attacked. In Vietnam, the U.S. lost politically and a backlash against that war triggered a domestic revolt. In Iraq, the toppling of Hussein pushed Iraq into the Iranian orbit, a country which is nominally a principal adversary of U.S. elites. In Afghanistan, the U.S. continues to fight its longest war with thousands dead and “no end in sight.” When it comes to terrorism, Melman saw terrorist actions as tied to alienation, individuals cut off and remote from social integration. Clearly social inclusion could remedy such a situation, but economic decline and an absence of solidarity simply compounded terrorist threats (whatever the diverse origins).
Another key myth was the ability to organize and sustain a “post-industrial society.” A report in Industry Week (August 21, 2014) noted that between 2001 and 2010, the U.S. economy shed 33% of its manufacturing jobs (about 5.8 million), which represented a 42% decline when controlling for the increase in the workforce. After controlling for increases in the working-age population during this period, Germany lost only 11% of its manufacturing jobs. While scholars debate whether trade or automation and productivity is more significant in causing such job loss, automation in a nation state serving to protect the domestic organization of work will clearly preserve more manufacturing jobs than others. In fact, the integration of automation and cooperative workforces can preserve jobs, a point made by Melman in his last great work, After Capitalism: From Managerialism to Workplace Democracy. Melman’s support for the domestic anchoring of jobs through proactive investments in civilian infrastructure including sustainable forms of alternative energy and mass transportation also belied the associated myths of globalization and free markets—both of which failed to automatically yield a proactive welfare state responsive to maintaining full and sustainable employment.
Alternatives to a Society Spiraling into Abyss
Melman believed in a revolution in thinking and acting centered on the reorganization of economic life and the nation’s security system. He believed the core alternative to economic decline was the democratic organization of workplaces. He favored the Mondragon Industrial Cooperatives in the Basque region of Spain as the exemplary model for such an alternative. These cooperatives went beyond the small scale, and potentially vulnerable, stand-alone “socialism in one firm” model of local cooperative enterprise. Mondragon has networks diversified lines of businesses, not only creating a more resilient system in the face of reduced demand in particular sectors, but also promoting the potential for job ladders such that workers could be more easily transferred from one job to another when job loss struck. Mondragon combines a technical university, development bank and cooperatives in one integrated system.
Melman believed that both political and economic decline could be reversed by vastly scaling back the U.S. military budget which represented a gigantic opportunity cost to the national economy. The other side of the $1 trillion military budget was a vast development fund which Melman believed could be used to modernize the U.S.’s energy and transportation infrastructure and reinvest in other areas of economic decay self-evident in collapsing bridges, polluted waterways, and congested transit systems. He linked urban under-development and deficits in ecological remediation to wasteful military budgets.
The program for demilitarization required four key elements, outlined by Melman in The Demilitarized Society: Disarmament and Conversion. First, he championed a comprehensive program for general and complete disarmament (GCD) in multi-lateral disarmament treaties of the sort favored by President John F. Kennedy and described in his famous June 10, 1963 American University address. Rather than have so-called “rogue states” disarm, all nations would coordinate their military budget and military power projection systems. In contrast to proliferation reduction strategies which beg the question as to why countries like North Korea would pursue nuclear weapons (to defend against a U.S. military attack). This was a program for not only nuclear but also conventional weapons reductions.
Second, disarmament treaties would be linked to a program of military budget reductions and alternative civilian investments. These reductions could pay for needed infrastructure improvements, including the need to rebuild mass transit and energy systems, a theme taken up by this author, Brian D’Agostino and Jon Rynn in a series of studies. Alternative government investments in needed civilian areas could provide the alternative markets needed to help transition military-serving investments into more useful civilian activity.
Third, the conversion of military factories, bases, laboratories and affiliated institutions like universities could provide a way to recoup wasted resources and provide a security system for those threatened by military budget reductions. Conversion involved advanced planning and reorganizing workers, engineers, managers and technology. For example, at one point in the post-Vietnam War era, the Boeing-Vertol company (which made helicopters used in the Vietnam War) successfully produced subway cars used by the Chicago Transit Authority (CTA).
Finally, disarmament would also have to provide for an alternative security system which would maintain security even during a period of declining global military spending. Melman supported a kind of international police force useful in peacekeeping and related missions. He recognized that the multi-year disarmament process would still leave in place defensive systems as more offensive systems were initially scaled back. Melman recognized that Britain’s unilateral disarmament campaigns were political fiascos which made the left an easy political prey to the political right. In contrast, the GCD approach still left room for comprehensive cutbacks without the political fallout associated with claims that states were left vulnerable to attack. Verification and inspection systems would insure that cuts could be made safety and any cheating could be detecting by states attempting to conceal weapons systems.
Ideology and the Power to Plan
Where did the power come from to demilitarize the economy and change the degenerate state? Melman believed that workers’ own self-organization through cooperatives provided an essential mechanism to create the primitive accumulation of economic power which would have a significant political spin-off effect. He believed that once cooperatives reached a certain scale they would act as a kind of lobbying system to redirect the political culture to more productive and sustainable pursuits as opposed to predatory, militaristic and ecocidal ones.
The biggest obstacle to economic and political democracy lay not in technical or economic barriers, however. In a series of studies published in the 1950s, like Dynamic Factors in Industrial Productivity and Decision-Making and Productivity, Melman showed how cooperative firms could actually be more productive and efficient than normal capitalist enterprises. One reason was that workers’ self-management lessened the need for costly managerial supervision. Another reason was that workers’ had direct knowledge of how to marshal and organize the shop floor, whereas managers’ knowledge was more remote and hence less operational. Workers learned by doing and had the knowledge to organize work, but an alienating system blocked such knowledge as workers were blocked from decision-making power even though workers was “responsible” for their work.
If workers could organize economic power on a grassroots level, so too could communities directly organize political power on a local level. Thus, Melman convened “The U.S. After the Cold War: Claiming the Peace Dividend,” a May 2, 1990 national town meeting in which dozens of cities rallied in face-to-face meetings to cut the military budget and invest in needed urban and ecological investments in a peace economy. Political democracy in this case was extended by a radio network broadcast over Pacifica and dozens of affiliated stations.
The key barrier to extending democracy lay in the educational system and social movements which had failed to embrace the legacy of self-management and economic democracy. Trade unions, while necessary for advancing workers’ interests, had become focused on narrow pay or social benefits schemes. They often divorced themselves from questions regarding how work was actually organized. Melman believed that peace movements, while opposing senseless wars, had “become safe for the Pentagon.” By being remote from the culture of production, they did not realize the simple fact that producing and selling weapons generates capital and power, thereby requiring more than a reactive protest system to Pentagon capital accumulation. In contrast, the founder of Mondragon, José María Arizmendiarrieta Madariaga, realized in the Nazi bombing campaign of the Spanish Republic that technology had become the source of ultimate power. The other side of Picasso’s Guernica was a system in which workers themselves could control technology for their own use, providing an alternative to capitalists and militarists monopoly over technological power.
Ultimately, through his prolific publishing career, activism with trade unions and the peace movement, and continuing dialogue with scholars and assorted intellectuals, Melman held out hope that critically informed knowledge could promote an alternative system for organizing power. Although he recognized how universities had become servants to both the Pentagon and Wall Street (and indulged in growing administrative overheads and extensions to their managerial control), Melman still clung to the belief in the power of the idea and alternative formulation to established wisdom. The Trump presidency has falsely marshalled the lessons of the U.S.’s economic and political decline. Today’s activists would be wise to embrace Melman’s ideas to fill the power vacuum in the wake of the administration’s legitimacy crisis and movement reactive malaise. “Resistance,” the movement’s hegemonic meme, is not reconstruction.