Reader Jason Pl pointed out this post from Jon Taplin, which starts with the less than cheery chart on US durable goods production courtesy Floyd Norris. As you can see, the only growth biz is military:
Military contracting procedures means that work will stay with domestic players. So one could take the cynical view that the US has been willing to cede every kind of manufacturing we could, and defense contracting is by nature off that list.
But does this split have to do with bona fide security concerns? Yes and no. Why have we let chip manufacture go overseas? We are outsourcing more of our chip manufacturing to China (Taiwan is the biggest single foreign fabricator, which may explain China’s keen interest in reasserting control). Trade in advanced technology products is heavily weighed in favor of China.
Taplin gives a dystopian view:
We have so hollowed out our industrial plant that the only thing we are now producing is weapons of war. The great British Historian Arnold Toynbee’s theory about the decline of the Roman Empire has lessons for our current age.
The economy of the Empire was basically a Raubwirtschaft or plunder economy based on looting existing resources rather than producing anything new. The Empire relied on booty from conquered territories (this source of revenue ending, of course, with the end of Roman territorial expansion) or on a pattern of tax collection that drove small-scale farmers into destitution (and onto a dole that required even more exactions upon those who could not escape taxation), or into dependency upon a landed élite exempt from taxation. With the cessation of tribute from conquered territories, the full cost of their military machine had to be borne by the citizenry.
This I know. We cannot continue on this course of decline.
Yves here. I have to interject. “Cannot continue?” I see tremendous inertia as far as the path we are on is concerned. We not only have bread and circuses, have version 2.0, with offerings targeted by income level and age group. Back to Taplin:
While many of the elite escape taxation with their brilliant “tax shelter” accountants, the middle class (Rome’s “small scale farmers”) are being asked to shoulder the economic burden of empire.
Shortly after the election President Obama made it clear that the chokehold of the Military Industrial Complex over our economy was not going to change on his watch–…After all, with 4% of the world’s people why shouldn’t we spend 45% of the world’s military spending?
While Obama makes symbolic cuts in the Military budget, the House threw in 550 new earmarks into a $636 Billion Military Budget. Lyndon Johnson thought we could have both Guns and Butter, but he was wrong. Both Jimmy Carter and Bill Clinton were afraid to take on the Military Industrial Complex that the Republicans have always favored. Eisenhower was right that continuing on this disastrous course is a form of generational theft. According to Catherine Lutz the U.S. Military has “909 military facilities in 46 countries and territories.” This is truly insane. We need to bring the personnel on these bases home and start selling off the precious foreign real estate to help liquidate our massive debt.
I have only one question–Where is the national politician with the courage to say we no longer have to act as the unpaid policeman of the world?
My simplistic view is quite different. Our economic power is past its sell-by date. US leadership is deeply committed to maintaining whatever hold on global authoirty that we can. Nukes and a big navy, which makes us the only country that cna land a large army, are very helpful in that regard. How do you think our little chats with China over what we owe them would go if were weren’t the world’s sole superpower?
If we don’t manage our way out of our debt mess, we may wind up in the long run having to sell our “precious foreign real estate.” Maybe it’s time for someone to tell the DoD that failure to rein in Wall Street will create a security risk.