The Security-Industrial Complex

Most people don't read the business pages much, if at all. This is quite understandable, they're hardly the world's most exciting read (far from it in fact) and if you don't have a background in economics or business it is easy to feel lost. This is unfortunate. That economics plays a central role in the way the world run should be fairly uncontroversial. According to the Institute for Policy Studies, in 2000 corporations made up 51 of the largest 100 economies in the world. This means they can exert massive influence on governments (it is possible to debate the extent to which this happens, but not that it occurs). Political leaders of all stripes go out of their way to show that they are business friendly and that their policies either are or will be. You don't have to be an anti-capitalist to see any of this.

Of course, reading the business pages alone may not be very useful. Business people can make use of them because they understand how the information contained within fits into the wider system and how to make money from it. Those of us seeking to use it to understand how the world works, particularly those of doing so from a dissident perspective, must also develop an understanding of the context and background to what we are (or more accurately as I suggested above, aren't) reading.

Consider this article by Gary Duncan and Ingrid Mansell from yesterday's Times (7/10/04). The headline should make the ears of anyone dubious about corporations prick up: "Companies profit off back of terror threat". Probably the details are slightly different from what you might expect given this beginning, but it remains a fascinating and potentially quite informative insight into the working of the global capitalist system.

Duncan and Mansell report that the US's homeland security budget has more than doubled to $40.1 billion (£21.8 billion) since the creation of the Department for Homeland Security (DHS) in the aftermath of September 11th. This offers "a new and large source of revenue for companies, says Merrill Lynch, the investment bank. The pile of money is also spilling across the Atlantic where British companies are profiting from the increasing security consciousness."

They quote Jose Rasco from Merrill Lynch who notes, "While the jury is out on how these programmes will affect the economy and our productive capacity as we become more of a wartime economy, it is clear that certain sectors within the defence industry stand to benefit." Those particular sectors being "technologically driven, productivity enhancing areas of the defence industry."They continue,

Other analysts believe the benefits of the massive security drive will spill over into other high technology sectors, including electronics and the biotech industries, both in America and in leading developed economies including the UK.

The benefits may already be accruing. According to Justin Urquhart Stewart, of Seven Investment Management, the asset manager, ?"There have been huge gains by high-tech development companies. This is where we are seeing growth in the British defence industry - not in the traditional, big industrial companies, but in smaller, specialist high-tech ones.?"

That corporations are profiting from the DHS' programmes and activities seems clear, but there are some voices of dissent.

The scale of the build-up in security spending, as well as the steep increase in more traditional defence spending on the US Armed Forces, has created concern among some analysts over potential damage to America?s economic performance. These activities are seen by economists as frequently inefficient and their rapid expansion could undercut US productivity growth across the economy as a whole.

But, Rasco suggests that we needn't worry. Duncan and Mansell note that he "believes that use of next generation equipment in many of the new security programmes could mean greater efficiency as well as potential spin-off benefits." He points out that much of equipment being purchased uses cutting-edge technology and notes, "The good news is that they are often highly productive as well." He goes further to suggest that the investment could lead to commercial spin-offs, citing as a precedent the development of Teflon as a spin-off from the Apollo programme to reach the moon.

In fact Rasco could have used any number of examples, the phenomenon is far from unusual. Contrary to the rhetoric about free markets, Western economies remain quite interventionist, albeit in oftentimes subtle ways. Noam Chomsky discusses this on a number of occasions, although one of the best expositions appears in Understanding Power (Peter R. Mitchell and John Schoeffel eds., The New Press, New York, 2002). He points out that after the Second World War the world economy was in serious difficulties and argues that

every one of the rich countries hit upon more or less the same method of getting out. They did it independently, but they more or less hit upon the same method - namely, state spending, public spending of some kind, what's called 'Keynesian stimulation.'

He discusses the history of the US example, considering how this role was filled first by the New Deal and then by the war effort (when the US had a full-blown command economy controlled from Washington, largely by corporate executives). After the war it was clear that some form of government stimulation was needed, although he suggests that there was some question as to whether government spending should be focused on social or military spending. The latter, of course, won out because it "doesn't distribute wealth, it's not democratizing, it doesn't create popular constituencies or encourage people to get involved in decision making." People don't have an opinion on whether the government should build a stealth bomber or a cruise missile (a bad example to be sure, but you get the idea), but they do care where schools, hospitals and the like are built and on how they are run.

Chomsky points out that other countries did it slightly differently. Japan set up The Ministry of International Trade and Industry (MITI). This discusses with major corporations how the economic system will be run over the next few years. They plan how much consumption there will be, how much investment will occur and where. He compares the levels of spending on lasers and software made during efforts to develop the "Star Wars" missile defence programme and points out that they were roughly the same as the amounts spent by MITI in those areas. The Japanese system is more efficient than its US counterpart, subsides go straight to commercial market, rather than being channeled into the military, which might develop something from which there's a commercial spin-off.

It should be clear that the rhetoric about "free markets" and the like leaves a lot out. Nonetheless it remains a useful propaganda tool against the workers, who remain subject to "flexible labour markets" and must content themselves with low-pay and bad hours. While the DHS may function as a new method of stimulating the economy, there is nothing new about the role it plays.