Re-Tooling America


It seems like only yesterday that business writers were pitching Silicon Valley as The New New Thing and business editors were salivating over Enron CEO Ken Lay. But not Seymour Melman, whose assessment of American capitalism has always been less optimistic, less trendy, and less packaged. In After Capitalism, he trenchantly argues that despite the American economy’s post-World War II expansion, the United States has become a third-rate economy resembling, of all places, Soviet Russia. His comparison rests on the military-industrial complex’s persistent economic dominance. Since 1946 the U.S. economy has developed a dangerous dependence on narrowly focused Pentagon-sponsored projects. This dependence has ensured that our productivity, impressive as it seems on paper, has actually squandered the last four decades churning out goods for dubious military-industrial enterprises while shunting capital from the nation’s manufacturing base. Although the financial press might quake with pleasure over the venture capital fueling every software engineer’s innovative itch, Melman sees the dot-com mania as a distracting trend in a more insidious economic situation. As Enron’s demise and the recent dot-bomb attests, he’s onto something.

America’s reliance on Pentagon-related projects boggles the mind. The United States currently owns warheads that equal about 2.3 billion tons of TNT. (Conservatively, only 188.2 million tons are required to vaporize both Russia and China.) The Bush administration is asking $343.2 billion for the Pentagon in 2002, $32.6 billion above 2001 levels. Since 1990, the United States has spent $35 billion annually on weapons systems contracts alone. Meanwhile, average American consumers, who aren’t in the market for a set of rocket launchers or a few warheads, are buying 60 percent of their consumer goods from foreign companies.

Melman highlights America’s once-thriving machine tool industry–the production of machines used to make machines–as deindustrialization’s most conspicuous victim. The production of machine tools is especially effective at generating jobs. But job creation is not a concern in a deindustrializing economy. “The decline by almost half in production employment in the machine-tool industry,” Melman writes, “was accompanied by a reduction in the number of factories by 50 percent, and a 50 percent increase in dependency on imported machine tools.” Seventy percent of those imports now come from Japan, Germany, and Switzerland. How can we buy American when all America is making is stuff that’s going to gather dust (one hopes) in a federal warehouse?

Melman misses an opportunity at this point to ask why we buy the stuff we buy at all. In avoiding the thorny issue of consumer behavior, he too easily accepts the conventional assumption that what matters macro-economically is production, not consumption. If a company builds it, the reasoning goes, the consuming masses will come. It’s worth recalling that nobody took the danger of overproduction for granted in the 1920s. Threatening to pop the economic bubble that emerged that decade was the concern that durable goods would quickly saturate the market. The Depression proved these concerns accurate, while highlighting the need for better advertising, marketing, and product design. These tactics took hold, but some consumers also became increasingly savvy. (Recent scholarly work on consumer behavior suggests that we’re not the moronic mall rats that we’re purported to be.) By overlooking the question of consumption, Melman leaves us wondering what the larger benefit would be (aside from more factory jobs) if America was producing even more basic consumer goods.

And what about all those service jobs that replaced America’s declining manufacturing base? I can’t buy a decent American CD player, but I can buy a Japanese one with a credit card from an American company owned by an American bank. (And rack up a substantial consumer debt in the process, but let’s ignore that problem for the moment.) A lot of American men and women who once would have been fitting a gadget into a widget are now doing the paperwork for those of us buying imported widgets. But for Melman, it’s not job creation that’s an end in itself–but manufacturing job creation. The bias feels a bit dated.

That said, Melman’s attack on the military-industrial complex is the most comprehensive to date. As deindustrialization progresses, he explains, CEOs are transformed from renegade corporate entrepreneurs into lazy “state managers” whose decisions are dictated by the U.S. military economy’s “central administrative office.” Gone are the CEOs’ unencumbered entrepreneurial instincts. Gone is the free market. A free market, after all, wouldn’t tolerate the rampant and wasteful overproduction of nuclear weapons, but an economy managed by a state/business partnership lacks the market’s self-regulating free hand to trim away its excess fat. Moreover, an economy in which “the new money made available to the Pentagon exceed[s] the net profits of all American corporations,” provides little incentive for corporate efficiency. As Melman explained in an earlier work, Pentagon Capitalism, when a firm signs a contract with the Pentagon, “it is virtually failure-proof.”

This entire arrangement hurts the American worker. The cover photo on After Capitalism is a very large screw. On the one hand, this screw represents the decline of America’s manufacturing base. On the other, it aptly symbolizes what happens to workers under state-sponsored capitalism. Melman’s argument here isn’t that capitalism sucks, but rather that worker empowerment–that is, the direct participation of unions in the corporate decision-making process–would better fuel the underlying capitalistic requirement of higher, more streamlined, and adaptable production. It’s not that state managers are capitalist pigs, but rather that–with their dependence on Pentagon contracts–they’re Soviet sheep posing as capitalist pigs. When managers don’t have to be competitively productive in order to survive, the traditional means that unions have always employed to obtain worker empowerment are undermined. Corporations, instead of reluctantly bending to the will of organized workers (or at least sitting down with them to negotiate), rely instead on federal protection (in the form of laws, loans, and tax breaks) when they encounter difficulty–be it a strike or, say, a terrorist attack.

You’d be correct in thinking that it should be a good time to be in a union. The technological changes that historically threatened to replace workers now demand them for their very operation. Melman explains that “a well-educated, versatile workforce, trained to exercise a high degree of control and decision-making on the factory floor, will get more productivity and less downtime out of the new technologies.” The transition to more sophisticated forms of technology–to machines that “think” rather than perform a discrete task–would seem to be a boon for the American worker, defusing a longstanding threat to his existence and leading to his skilled expertise in a particular high technology. This would all be true were it not for the dominance of state managerialism. Under the safe umbrella of a Pentagon contract, managers lack incentive to share authority. Instead they choose to “hold down labor’s wage and to guard their power jealously.” This strategy limits wage workers to antiquated assembly line tasks while forcing companies to purchase parts requiring highly skilled technological workers from places like Japan and Germany. It’s clearly more expensive and less productive. But hey, efficiency is for capitalists.

Crudely, this is Melman’s critique of capitalism. His response is the ambitious plan of an activist industrial engineer rather than the blueprint of a seasoned pragmatist. This observation is not to suggest that Melman hasn’t done time on the factory floor. Indeed he has. Melman is a professor emeritus of industrial engineering at Columbia University. In 50 years of observing American workers, he has noticed that they have “maintained a mostly quiet but unrelenting struggle for their own empowerment.” They have responded to a “great parade of alienations” with an “ongoing struggle for workplace democracy.” The struggle, as it materializes, promises “to invent a new kind of economy.”

A grand idea. But it’s the actual process–not the idea–that I find hard to grasp in anything but the most abstract form. In order for workers to create a post-capitalist economy where they “formulate their own rules” and where workers and managers share the corporate decision-making process, the following scenario will transpire: “Disalienation [must be] carried out in a manner that establishes a mutual independence founded in solidarity. This solidarity includes consensus on common social goals and values, mutually agreed upon procedures for decision-making and for resolving disputes, and mutual trust. Trust stems from a belief or confidence in the honesty, reliability, and justness of other people.”

Sadly, American unions have spent the last century failing to dismantle three obstacles to this goal: race, politics, and family. In a tome that, at its core, is about work, Melman never discusses these factors. His silence, given the history of work in America, is blaringly conspicuous. In a nation where race has historically structured work along discriminatory lines, where the dominant political structure barely tolerates union activity, and where the idealized domestic life could not be more protected from the rigors of working life, it’s hard to see Melman’s post-capitalist world as anything but a utopian vision. Before we start thinking about life after capitalism, we must first confront and diminish these imposing barriers to worker empowerment. Then maybe, just maybe, we can start to think realistically about disalienation. In the meantime, the slate isn’t clean. Like it or not, we’ll just have to give capitalism a chance.

James E. McWilliams is thankful that he has nothing to do with a dot-com company, the Pentagon, or Enron.