USA: Militarism and the Economy (Current international problems)

USA: militarism and the economy R A Faramazyan

Moscow Progress Publishers 1977

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FOREWORD CHAPTER I THE GENERAL CHARACTERISTICS OF US MILITARISM

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1. THE RISE OF MILITARISM

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2. US MILITARY ACTIVITIES AFTER THE SECOND WORLD WAR CHAPTER II MILITARISM AND THE ECONOMY

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1. THE ROLE OF THE ECONOMY IN WAR

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2. THE ECONOMIC AND MILITARY-ECONOMIC POTENTIALS

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3. MILITARY FINANCE CHAPTER III BASIC PRINCIPLES OF FINANCING US MILITARY-ECONOMIC ACTIVITIES

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1. GENERAL MANAGEMENT OF ARMED FORCES DEVELOPMENT

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2. THE SYSTEM OF ESTIMATING MILITARY DEMAND AND DRAFTING THE MILITARY BUDGET

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3. MILITARY BUDGET EXECUTION AND MATERIAL SUPPORT OF THE ARMED FORCES CHAPTER IV THE STRUCTURE AND GENERAL CHARACTERISTICS OF DIRECT MILITARY EXPENDITURE

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[introduction.]

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1. DEFENCE DEPARTMENT EXPENDITURE

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2. AEC AND NASA EXPENDITURES

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3. FOREIGN MILITARY ASSISTANCE

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4. THE STRUCTURE OF GENERAL DIRECT MILITARY OUTLAYS CHAPTER V MILITARISATION OF THE US ECONOMY

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1. THE EXTENT OF MILITARISATION OF THE ECONOMY

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2. THE STRUCTURE OF MILITARY PRODUCTION AND THE DEGREE OF MILITARISATION OF INDIVIDUAL INDUSTRIES

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3. DISTRIBUTION OF MILITARY PRODUCTION BY AREAS AND THE LEVEL OF MILITARISATION OF INDIVIDUAL AREAS CHAPTER VI ORGANISATION OF US MILITARY PRODUCTION

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1. THE ROLE OF THE FEDERAL GOVERNMENT AND PRIVATE FIRMS IN THE MANUFACTURE OF MILITARY GOODS

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2. MILITARY PROCUREMENT POLICY AND PRACTICE

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3. CONCENTRATION AND CO-OPERATION OF ARMS INDUSTRIES

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4. THE COMPETITION BETWEEN MONOPOLIES FOR MILITARY CONTRACTS CHAPTER VII SOCIO-ECONOMIC IMPLICATIONS OF MILITARISM IN THE USA

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1. ECONOMIC IMPLICATIONS

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2. THE IMPACT OF MILITARISM ON THE LIVING CONDITIONS OF THE WORKING PEOPLE

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AFTERWORD

FOREWORD

p Militarism is an establishment inherent in capitalism and called upon to build up and use military power to preserve class oppression, tighten the grip on existing and conquer new spheres of economic and political sway of the exploiting classes. Militarism comes on the scene in capitalist states pursuing a policy of expansion and an arms race, preparing for wars of conquest. Militarism has reached its heyday in the imperialist era, particularly after World War II, it was stimulated by the cold war. The objectives, level and forms of militarism are determined by imperialist policy. p Before the world split up into the two social systems the imperialists had used the military machine to maintain their rule at home and to deal with their rivals abroad to reverse time and again an upset balance of power between capitalist states and alliances. Today, militarism operates mostly under the banner of anti-Communism and antiSovietism, and is spearheaded against the world socialist system. p A major factor of militarist growth is the priority importance attached by the imperialists to the military machine among the means employed to pursue their neocolonialist policy, to suppress by force of arms the national liberation movement, to dictate their will to the developing states. After World War II the imperialists have repeatedly used military force against them. p The growth of militarism is also attributable to the use by imperialist quarters of military force to protect their 8 mounting foreign investments. Lenin listed the export of capital among the basic characteristics of imperialism. The foreign investments of capitalist states are continuing to grow and have now reached tremendous proportions. In 1970, the United States alone had an estimated 150 thousand million dollars in foreign investments. Over the past few years, a system of international supermonopolies has taken shape, which accounts for an increasingly greater share in total capitalist production. The preservation and safety of foreign investments, which secure access to foreign, in particular strategic sources of raw materials, cheap labour and commodity markets and bring fabulous profits to international monopolies are some of the basic tasks the imperialists have entrusted to their armed forces. p The arms race is used in the capitalist countries as a means of state-monopoly stimulation of capitalist reproduction, reduction of unemployment, prevention of economic crises, and as a source of monopoly superprofits. A close union of militaryindustrial companies, the military circles and the government bureaucracy has formed on the basis of military economic work carried out on an enormous scale. This union, which has come to be known as the militaryindustrial complex, is an evil force which has a disastrous influence on the political, economic and spiritual life of bourgeois society.

With an increase in volume of military contract’s and in militarisation of the economy the influence and profits of this complex tend to grow. For this reason, the military-industrial complexes which function in different countries and are closely interconnected extol military power, seeking to aggravate the international situation and to increase military budgets. p Never before has militarism held sway over so many states as in the post-war years. Despite the growing contradictions between the capitalist countries, however, the imperialists tend to join their military efforts to secure their common class interests, setting up aggressive military blocs, signing numerous bilateral and multi-lateral military– political treaties for joint military economic work, in particular, for forming joint armed forces, preparing the infrastructure of theatres of war, manufacturing military equipment, etc. 9 p It is the cold war policy and the specifics of modern militarism that are to blame for the maintenance of huge armed forces even in peacetime. Their total strength in the member countries of NATO, SEATO and CENTO in 1970 was close on seven million men. [9•1 The outlays for their maintenance and technical equipment have reached an all-time high and continue to mount. The total direct military spending of the NATO countries alone grew from 18.7 thousand million dollars in 1949 (NATO foundation year) to 106.4 thousand million in 1971. p The United States accounts for the bulk of the military outlays and armed forces of modern imperialism. After World War II, the expansionist policy of US imperialism led to the building up of a huge military machine and an unprecedented growth of militarism, which is a terrible menace to mankind and world peace. p Apologists of militarism justify the huge military outlays of imperialism mostly by fabrications about the "communist menace”. However, history and the peace policy of the socialist community of nations have invariably disproved this pet argument of the militarists. This has become particularly evident today when the active and coordinated policies of the socialist countries, the consistent activities of the CPSU Central Committee and the Soviet Government in implementing the Peace Programme of the 24th CPSU Congress largely contributed to detente and demonstrated to the whole world that the central objective of the foreign policy line of the socialist community is to avert a new world war, to guarantee a lasting peace on earth and the security of all nations. p The Soviet-American agreements and treaties signed during the three Summit Meetings (May 1972, June 1973, June-July 1974), have led to appreciable progress in normalising relations between the two great powers, contribute to the easing of international tensions, produce a restraining influence on the arms race, reduce the danger of the breakout of devastating nuclear war, create more favourable opportunities for new talks on limiting and ending the arms race.

10 p This amelioration of the international climate is welcomed enthusiastically by world public opinion. Mankind’s vital interests require this change in the world situation to be deepened and widened and made irreversible. Imperialism, however, maintains its armed forces and military outlays at a high level, and the race in the production of new, costlier and more destructive weapons systems continues. The need for increasing military power and retaining its role as a foreign policy tool of imperialism is emphasised in every way. What is more, in recent time the most reactionary forces of imperialism, in particular the militarist and revanchist circles, the military-industrial complexes and the NATO leaders have notably stepped up their activities against detente, and are trying to stir up distrust in the relations among states and revive the spirit of the cold war, are advocating an intensified arms race, an expansion of military arsenals, a continuation of the "policy of strength”. All this indicates that if the current political detente is not reinforced by military detente the tendency towards growth of military preparations will continue in the near future with all its dangerous implications involved. The author attempts to show the causes of the unprecedented development of militarism in the United States, to analyse the size and structure of its military outlays, the degree of militarisation of its economy as a whole and of its individual sectors, discussing the organisation of military production, the rivalry between monopolies for lucrative military contracts, the methods for winning them. He demonstrates at large the impact military outlays have on the process of capitalist reproduction, the disastrous socio– economic effects of militarism and the arms race. His main task is to make the reader become better aware of the burden of the continued arms race, the great menace of modern militarism to all mankind, as well as the urgent need for pooling the efforts of all states concerned and of the progressive forces to supplement the current political detente in the world by military detente, to step up the struggle for ending the arms race, reducing armed forces and armaments, guaranteeing universal peace and international security. 11 *** p This book was first published in Russian in 1970. Since then certain changes have taken place in the international situation and in the military economic work in the USA, which insofar as possible have been taken into account when preparing the book for translation into foreign languages. The author acknowledges his profound gratitude to I. V. Antonova for her great assistance in preparing the manuscript for publication.

CHAPTER I THE GENERAL CHARACTERISTICS OF US MILITARISM 1. THE RISE OF MILITARISM

p The United States of America emerged as an independent state from the revolutionary war of liberation the North American colonies waged against British rule in 1776–83. In his analysis of that war, Lenin wrote: "The history of modern, civilised America opened with one of those great, really liberating, really revolutionary wars of which there have been so few compared to the vast number of wars of conquest... .” [13•1 p Although its own history opened with a revolutionary war it was not long before the United States itself embarked on a policy of aggression. American history is replete with wars of conquest and crimes, instances of cynical violation of other peoples’ rights and interests, interference in the affairs of other states under all manner of pretexts. As early as the War of Independence, the USA began to display a bent for aggrandisement and territorial expansion. At the peace talks with Britain the USA, which originally consisted of 13 states, demanded that Canada, which contained several British colonies at the time, be joined to it as the fourteenth state. In the 18th and 19th centuries, the North American continent was the main scene of US predatory wars. The US expansion encountered but slight resistance from the strife-torn Indian tribes, other neighbours who were weak militarily and economically and European powers busy with their feuds. Within the first century of its independence, the USA 14 widened its territory tenfold with a relatively little war effort. p Even in the pre-monopoly period, the expansionist ambitions of young US capitalism were not confined to the North American continent. In addition to its "domestic colonisation" drive the USA went ahead with the annexation and recarving in its favour colonies and spheres of influence in Latin America, Asia and the Far East. In Latin America, it acted under cover of the notorious Monroe Doctrine. In Asia and the Far East, where open conquest seemed impracticable on account of opposition from the strong colonial powers of Europe, the USA chose to rely on the "open doors" doctrine. At that time, the USA pursued an “isolationist” policy of non-participation in European affairs yet seized every opportunity to strengthen its positions outside Europe in the “peripheral” regions of the world at the expense of the European powers. p For all that, however, in the pre-monopoly period, US militarism was way behind its counterpart in the Old World. Unlike Europe, the United States had no experience of frequent, prolonged and bloody wars between dynasties. The few wars it waged had required a relatively small army and furnished no breeding ground for the growth of militarism. In the seventies of the last century, Marx wrote that because of its specific historical conditions, militarism and the. bureaucracy in America were far less developed

than in capitalist Europe. As time went on, however, the situation changed. The US military establishment steadily grew swelled by every new war. The rise of militarism was whipped up to a frantic pace by the advent of the imperialist era when the US rulers became obsessed by a craving for expansion, colonial conquest and forcible redivision of the world to bring it into line with the new balance of power. p The growth of US militarism was stimulated by the economic and political ambitions of the ruling circles, the continued development of capitalism. Lenin wrote in this connection that "modern militarism is the result of capitalism. In both its forms it is the ’vital expression’ of capitalism—as a military force used by the capitalist states in their external conflicts (Militarisms nach aussen, as the Germans say) and as a weapon in the hands of the ruling classes for 15 suppressing every kind of movement, economic and political, of the proletariat (Militarismus nach innen)". [15•1 p American capitalism developed by leaps and bounds. Industry grew faster than anywhere else in the capitalist world. In 1820, the US share in world industrial output was 6 per cent; in 1840, 7 per cent; in 1850, 12 per cent, reaching 15 per cent in 1860, when the USA ranked fourth in the world for total industrial output. p The abolition of Negro slavery, which hampered capitalist development, gave a new impetus to the productive forces. Within three decades following the Civil War the United States became the world’s biggest industrial power. Describing its economy Lenin wrote that "the USA is unrivalled either in the rate of development of capitalism at the turn of the century, .or in the record level of capitalist development already attained; nor has it any rival in the vastness of the territory developed with the use of the most up-todate machinery, which is adapted to the remarkable variety of natural and historical conditions.. .". [15•2 p Thus, by the late 19th century, the USA had emerged as the world’s leading nation industrially and technologically due to the specific historical conditions under which capitalism developed there: absence of survivals of feudalism, availability of vast “vacant” territories and a rich variety of natural resources, favourable climatic and geographical conditions, development unhindered by protracted wars, the advantage of labour immigration, the use of the capital and technological know-how of advanced European countries in building up industry, protection of domestic industries against foreign competition by high import tariffs, etc. p Despite its rise to the top in the world economy the USA, however, was behind a number of European states for the size of colonial possession and spheres of influence. To eliminate this disproportion, the US imperialists redoubled their efforts to expand them. As the world had already been divided the USA could achieve its goals only by redividing it by force of arms. Yet militarily the USA was inferior to the European powers at the time. That is why in the 1890s 16 the US imperialists stepped up their military activities, planning to use armed force, particularly the Navy, in pursuing a "policy of strength" to attain their political and economic goals on the world scene.

p Simultaneously, the US ruling circles proceeded to justify their policy ideologically, claiming that history had vested in the United States responsibility for leading the world. The US historian Woodrow Wilson, who later became President, bluntly stated: "We have come to full maturity.. . and the day of our isolation is past.... A new age is before us in which, it would seem, we must lead the world.” [16•1 p In the late 19th and early 20th century, the US imperialists extensively combined their "dollar diplomacy" with a "big stick" policy. In 1898, they unleashed the SpanishAmerican war, the first imperialist war for a redivision of the world. That war exposed the USA as a full-fledged imperialist power using armed force to grab territory from the old colonial powers. In that war, the USA seized the Philippines, Guam, Puerto Rico and other islands and established its domination in Cuba. In these newly acquired territories, it went about setting up its first overseas bases—strategic outposts of US imperialism. In the early 20th century, the US economy continued to develop at a much faster rate than that of the Old World. In 1913, the US share in world industrial output grew to 35.8 per cent from 30.1 per cent in the period 1896–1900. The USA provided a graphic illustration for the law of the uneven economic and political development of capitalist countries in the jmperialist era formulated by Lenin. The relatively rapid US economic build-up was accompanied by a growing disparity in the world alignment of forces and by rivalry in the contest for colonies and spheres of influence between the USA and the European powers embroiled as the latter were at the time in a bitter imperialist tussle. It was precisely this struggle for a redivision of the world, rather than the “lofty” and “noble” motives bourgeois apologists are so fond of invoking, that induced the USA to renounce the neutrality it had declared on August 4, 1914. Planning 17 to derive maximum profits and dictate its terms of a peace settlement, the USA declared war on Germany on April 6, 1917 when World War I was in its closing stage. The total strength of the American forces and US direct military expenditures in World War I are given in the following table. Fiscal year Total armed forces, thous. Direct military expenditure (mil. dollars) in current prices in stable prices 1957–58* 1917 1918 1919 361 1,708 3,041 602 7,110 13,548 936 9,916 17,873 Total ..... — 21,260 28,725 * Data in stable prices as calculated by Author. p Source: Statistical Abstract of the United States, I960, Washington, 1959, p. 244. p The US total war spending in fiscal 1917–19 was 21,260 million dollars in current prices. Its actual spending on World War I, however, was somewhat less, since the USA was not at war through all of the period 1916/17–1918/19. p In addition to its direct war expenditures, the US Administration granted generous loans to its allies. The First Liberty Loan Act of April 1917 authorised the Secretary of the Treasury, on the approval of the President, to make loans to allied governments up to 10,000 million dollars. In fact the US allies were loaned the following sums (see the table on the right):

Year Mil. dollars 1917 1918 1919 1920 885.0 4,739.4 3,470.3 350.3 Total .... 9,445.0 p Source: Harold Underwood Faulkner, American Economic History, New York, 1960, p. 597. p When the Act came into force, the foreign governments were no longer granted private US loans which until then had amounted to an impressive total. For example, between the outbreak of World War I 18 p and April 1917, US private loans to the Entente powers totalled 2,300 million dollars, of which 1,500 million had been made by Morgan alone. US bankers actively promoted the sales in the United States of stocks and bonds by Europeans. Between 1914 and 1919, some 3,000 million dollars’ worth of American stocks and bonds were sold by foreign owners. [18•1 The European powers had to repay part of the US war supplies with securities of US companies. p The First World War gave a mighty impetus to the development of US militarism and prompted a cardinal revision of Marx’s statement on the absence of militarism in the USA. Lenin wrote in The State and Revolution: "Today, in 1917, at the time of the first great imperialist war, this restriction made by Marx is no longer valid. Both Britain and America, the biggest and the last representatives—in the whole world—of Anglo-Saxon ‘liberty’, in the sense that they had no militarist cliques and bureaucracy, have completely sunk into the all-European filthy, bloody morass of bureaucratic-military institutions which subordinate everything to themselves, and suppress everything.” [18•2 p World War I whetted the aggressive appetites of the US imperialists who were out to annex new territories, acquire new spheres of influence and ultimately establish their domination in the world. That this was so was evidenced, among other things, by the 14point Peace Programme put forward by President Wilson. Another striking proof was the US active participation in the armed intervention against the young Soviet Republic. p The US casualties and losses in World War I were much smaller than those of the other belligerents. A little over 50,000 US servicemen were killed in action or died from wounds, which was l/25th, l/20th, and l/10th of the German, French and British casualties respectively. The war effort of all the belligerents cost them a total of 208,100 million dollars, of which the US share was 19.800 million, that of Britain 40,900 million, France 33,600 million, Germany 47,000 million dollars. [18•3 19 p With a smaller loss of lives and far less material spending the US rulers derived from the war much greater profits than the ruling circles of the other belligerent powers did. The market situation during the war stimulated the rapid development of the US economy. The gross national product grew from 39,000 million dollars in 1913 to 77,100 million in 1918. US foreign trade expanded rapidly. The favourable trade balance

resulted in the US gold reserves increasing from 1,526 million dollars in 1914 to 2,873 million in 1918. [19•1 p The war brought fabulous profits to the US financial oligarchy. In his "Letter to the American Workers”, Lenin wrote that American multimillionaires "have profited more than all the rest. They have converted all, even the richest, countries into their tributaries. They have grabbed hundreds of billions of dollars.... Every dollar is sullied with the filth of ‘profitable’ war contracts, which in every country made the rich richer and the poor poorer. And every dollar is stained with blood—from that ocean of blood that has been shed by the ten million killed and twenty million maimed....” [19•2 p After the war the world balance of power changed drastically.’The world’s first socialist government came to power in Russia in the wake of the victorious socialist revolution which ushered in a new era in mankind’s history, that of transition from capitalism to socialism. Apart from that, a new alignment of forces was in evidence among the capitalist states. The US economic and political role in the capitalist world had grown markedly. The USA had also moved ahead of the rest of the world in volume of exports. It had scooped up some 40 per cent of the world’s gold reserves. Once a debtor nation, it was now an international creditor. The economic centre of capitalism had shifted from Europe to North America. p In the twenties and thirties of this century, the US ruling quarters used their superior economic and financial positions to try and establish their domination in Europe. They took advantage, among other things, of the painful problem of war reparations and debts. At the US initiative, the 20 London Conference of the Entente powers in 1924 adopted the Dawes Plan and the Hague Conference of 1930, the Young Plan. These plans were designed to help the USA exploit the German reparations problem so as to establish its financial domination in Germany and at the same time increase the financial dependence of Britain, France, Italy and other European powers on the United States. What is more, it hoped that these plans would help it enslave the USSR economically. The plans failed but the US financial aid to Germany contributed to the revival of German militarism which soon plunged the world into another global war. p In the twenties the US economy continued to swell. US foreign investments increased markedly, particularly in Canada and Latin America. The US imperialists further consolidated their economic and financial positions in the capitalist world. The US economic growth was set back by the world economic crisis of 1929–33, then by the crisis of 1937–38. The slump of the thirties was terminated by the outbreak of World War II. p Under cover of the Neutrality Act of May 1, 1937, and its so-called policy of isolationism, the US Administration jointly with the governments of other capitalist states encouraged in effect the rearmament of nazi Germany and preparations for a second world war. When the war broke out, the USA chose to remain neutral. On September 9, 1939, however, President Roosevelt stated in a radio address on the outbreak of the European war: "This nation will remain a neutral nation, but I cannot ask that every

American remain neutral in thought as well.” [20•1 On September 5, 1939, the US Government issued a declaration of neutrality and imposed an embargo on arms exports to the belligerent powers. Two months or so later, however, at President Roosevelt’s insistence, the embargo was lifted to facilitate US aid to embattled Britain and France. p After its declaration of neutrality the USA stepped up its defence work, setting up special agencies to deal with economic mobilisation in an emergency. The defence appropriations and the strength of the armed forces were increased, and a decision was taken to expand the arms industries. 21 Congress passed a universal conscription act. Before long, the USA launched an extensive programme of arms shipments to Britain which was expanded particularly after the passage of the Lend-Lease Act of March 11, 1941. The Act authorised the President to lend and lease armaments and other materials to any state the defence of which he deemed essential for the security of the United States. p After nazi Germany’s attack on the Soviet Union, the USA continued to abide by its declaration of neutrality. What is more, its reactionary quarters sought to exploit the nazi attack to further their imperialist ends by steps to drag out the war and thus have Germany and the USSR bleed each other as long as possible. But the more far-sighted of the American leaders, notably President Roosevelt, who were fully aware of the extent of the nazi menace, knew that the US interests would be best served by an alliance with and assistance to the USSR in its war against nazi Germany. Two days after the German attack on the USSR the Roosevelt Administration declared that the United States would give the Soviet Union every possible assistance. The Japanese attack on Pearl Harbor on December 7, 1941 ended the US neutrality. Before the end of the month the USA declared war on nazi Germany and Italy. p World War II assumed a much wider scale than World War I. American economists estimated that the direct war expenditures of all the belligerent capitalist states in World War II totalled 925,000 million dollars, of which the US share was 325,000 million, nazi Germany’s 272,000 million, Britain’s 120,000 million, Italy’s 94,000 million, Japan’s 56,000 million, and France’s 15,000 million. [21•1 The US ruling circles have been exaggerating in every way their financial losses in World War II and their contribution to victory over nazi Germany. President Truman, in his message to Congress on the budget for fiscal 1947, stated that the Second World War had cost the USA 347,000 million dollars. These totals (325,000 million and 347,000 million dollars) are clearly overstated, as evidenced, in particular, by other US publications giving smaller figures. 22 Table 1 US War Expenditures, Fiscal Years 19’il Through 1945 (thousand million dollars) Department Fiscal years Total 1941 1942 1943 19/i 4 1945 Defence Department .... Department of the Navy . . Maritime Commission . . . War Shipping Administration .... 3.7 2.3 0.1 * ’ * 0.2 14.1 8.6 0.9 0.1 0.7 0.5 1.1 42.3 20.9 2.8 1.1 2.0 1.2 1.9 49.2 26.5 3.8 1.9 2.1 1.4 1.9 50.3 30.0 3.2 2.0 1.2 1.5 1.7 159.6 88.3 10.8 5.1 6.0 4.0 6.8

Department of Agriculture The Treasury . . Other . . Total .......... 6.3 26.0 72.2 86.8 89.9 281.2 p * Less than 50 million dollars. p Source: Richard W. Lindholm, Public Finance and Fiscal Policy, New York, 1950, p. 257. p Lindholm, for instance, writes that during the five fiscal years of the war (1941–45), the US total military expenditure, including that under the Lend-Lease Act, amounted to 281,200 million dollars, i.e., 87.1 per cent of the total budget appropriations. Lindholm adduces further data on their annual distribution between individual departments (see Table 1). A considerable share of the sums tabulated for the Department of Agriculture and the Treasury was expended under Lend-Lease. p According to official American sources, "national defence" spending for the period 1940/41–1944/45 totalled 251,300 million dollars in current prices. [22•1 A sizable proportion of that was spending under the Lend-Lease Act. Between March 11, 1941 and October 1, 1945, it ran to some 44,000 million dollars, of which 22,100 million was spent on arms shipments, 9,700 million on equipment and materials 23 supplies, 6,100 million on food supplies, 2,300 million on petroleum products deliveries, and 3,800 million on transportation and other services. p Unquestionably, America’s aid to its wartime allies under Lend-Lease was a help in their struggle against nazi Germany, but the US ruling quarters have played up the role of Lend-Lease as the well-nigh crucial factor of victory over nazi Germany. At the same time, they prefer to keep silent about Lend-Lease being a means for US imperialism to attain its long-range goals. L. S. Amery, of the British Conservative Party, in a book published in 1946, writes that American businessmen and senators regarded Lend-Lease as a "business transaction in which Britain was hired for the job of defending America". [23•1 p World War II boosted US economic growth. Situated far away from the main theatres of war, the USA took advantage of the war market situation to consolidate its economic and political positions in the capitalist world. The US monopolies raked in fat profits from war supplies. The US gold reserves grew from 12,790 million dollars in 1937 to 24,399 million in 1948, which was 71.3 per cent of the total the capitalist world had at the time. The US share in the industrial output of the capitalist world increased from 34.9 per cent in 1938 to 53.9 per cent in 1948. p Leaning on their overwhelming economic and military power in a situation where the economy of Western Europe was ravaged by the war, the US imperialists went ahead with steps to establish their world domination, opening a cold war against the Soviet Union and other socialist states, making efforts to check the national liberation movements in the colonial and dependent countries. The USA became the centre of

militarism and reaction, acting as the ^ “savior” of the capitalist system and as a "world policeman”. p At the end of and immediately after World War II the USA, in its aggressive plans, pinned great hopes on its atom bomb monopoly as an instrument of pressure on the Soviet Union. Secretary of State Byrnes in an interview in June 1945 with US nuclear scientists opposed to the atomic 24 bombing of Japan, did not argue that the bomb was needed to defeat Japan, but rather that it should be dropped on its cities to "make Russia more manageable in Europe”. One may fully agree with the British Professor Blackett when he says that the atomic bombing of Japan "was not so much the last military act of the Second World War, as the first act of the cold diplomatic war with Russia”. p The US post-war policy found its graphic expression in their military strategy, in the nature of their military– economic activities. The weakness of other capitalist states, recipients of US aid under the Truman Doctrine, the Marshall Plan and other programmes, the common class interests of the ruling circles of the capitalist states, and their fear of the growing socialist system enhanced still more by the USfabricated myth of the non-existent "Soviet threat"—enabled the USA to knock together the aggressive NATO, SEATO and CENTO military blocs, conclude many bilateral military treaties, set up numerous military bases, notably in capitalist countries bordering on the socialist states. All this was accompanied by declarations of peace and the allegedly defensive nature of US-led military alliances and treaties. p The Soviet Government from the very outset exposed the far-reaching plans of the USA and of the military blocs set up under its aegis. In connection with the setting up of NATO the Soviet Government stated that "the NATO countries are not threatened by anyone and no one is going to attack them, that this military bloc has an aggressive character and is spearheaded against the USSR and other peace-loving countries". [24•1 p The USA, and its allies of the military blocs, embarked on the road of aggravating the world situation and stepped up the arms race in preparation for a war of aggression against the socialist countries. This stimulated the growth of militarism at a pace unprecedented in peacetime. The military expenditures of the imperialist powers grew rapidly to reach astronomic proportions (see Table 2). In 1971, NATO’s direct military spending was 5.7 times that in 1949, the NATO foundation year. 25 p At no period in human history has militarism involved as many countries as today. Outside the USA, militarism has developed in those capitalist countries whose ruling circles resort to armed force to strengthen their class domination, fight against revolutionary movements, retain their colonies and seize new territories. p Great Britain ranks second among the imperialist powers for the amount of military spending and the extent of militarisation of the economy. A considerable proportion of the British armed forces is stationed overseas. The geography of British military presence

abroad is striking evidence of its being used to preserve by force of arms the remnants of the British Empire and fulfil Britain’s commitments within the NATO, SEATO and CENTO blocs of which she is a member. Another factor contributing to the growth of British militarism is its alliance with US imperialism, the “special” Anglo-American relationship extending also to the military field. This is illustrated among other things by Britain’s active support for US aggressive military and political actions. Today when a trend towards termination of the cold war and towards detente is in evidence in the world, Britain’s Conservative government is stubbornly seeking to secure an increase in the military power and military outlays of the NATO member states. p The USA and the North Atlantic bloc it heads contributed to the revival of militarism and revanchism in the FRG. Following its entry into NATO in May 1955, the FRG took an active part in the arms race in later years. According to West German press reports, since May 1945, the FRG has spent on arms procurement far more than nazi Germany did between 1933 and 1939. The FRG’s direct military spending grew from 12,100 million DM in 1960 to 22,600 million in 1970. In 1958, the FRG contributed a mere 2.6 per cent of NATO’s total military expenditures. In 1970, its share increased to 6.1 per cent. The coming to power in the autumn of 1969 of the "minority coalition" of the Social-Democrats and Free Democrats, the conclusion of the treaties with the Soviet Union and Poland, which confirm the inviolability of the borders existing in Europe, the accord on West Berlin, the treaty on the main principles of relations between the GDR and the FRG, as well as some other realistic foreign 26 Table Direct Military Expenditures of NATO Member States (million dollars) 1949 1951 1953 1955 1957 I960 19G2 1965 1967 1969 1070* 1971 USA 13,503 372 2,181 1,370 33,059 1,220 3,217 2,517 49,377 1,970 4,715 3,962 1,497 768 350 307 396 129 149 94 69 10 40,371 1,819 4,388 3,148 1,758 882 447 385 341 133 138 133 77 12 44,159 1,829 4,390 4,457 2,134 978 486 475 367 147 147 151 83 9 45,380 1,654 4,597 3,911 2,905 1,145 458 267 386 161 149 170 105 5 52,381 1,715 5,039 4,527 4,319 1,389 607 331 425 225 193 170 200 7 51,827 1,535 5,819 5,163 4,979 1,942 753 421 504 286 267 210 231 10 75,451 1,817 6,386 5,900 5,348 2,178 888 505 573 326 295 313 324 8 81 ,444 1,756 5,452 5,763 5,832 2,258 1,023 593 630 352 352 425 367 8 77,827 1,906 5,950 5,982 6,188 2,340 1,102 622 701 367 380 473 430 8 77,791 1,006 6,473 6,309 7,026 2,625 1,205 540 745 405 420 533 440 9 Canada . . . Britain . . . France .... FRG** . . . Italy .... Netherlands . Turkey . . . Belgium . . . Denmark . . Norway . . . Greece .... Portugal . . . Luxemburg . . 482 179 199 153 52 52 51 50 2 731 279 233 268 69 80 90 54 5 Total . . Share of West European countries 18,700 4,825 41,906 7,627 63,750 12,403 54,068 11,828 59,802 13,814 61,265 14,231 71,504 17,408 73,936 20,574 100,321 23,053 106,416 23,216 104,286 24,553 106,420 26,723 XI o H Pi P! O O o p Note: Expenditures are quoted from NATO statistics slightly varying from national ones. The total is not fully equivalent to the total for individual countries due to approximation in conversion of national currencies to US dollars. p * Estimate.

p ** Before entry to NATO (in May 1955) the FRG Government met the occupation expenses of some NATO members and made a number of other payments as part of NATO’s military expenditures. Sources: The Commonwealth Survey, February 2, 1965, p. 112; NATO Letter, December 1970, p. 23; Aerospace Daily. 1971. p. 272. 27 policy actions of Chancellor Brandt’s government have notably contributed to improving the situation in Europe. p One should not ignore the fact, however, that under the pressure of Right-wing militarist extremists, the Bonn Government is nevertheless contemplating a further expansion of military activity and an appreciable increase in the expenditure on the Bundeswehr. p In defiance of the restrictions on arms manufacture imposed by the Potsdam Agreements, West German monopolies are rapidly building up military industry. Before the mid-sixties, the FRG imported mostly from the USA about sixty per cent of its weapons and military equipment. Today West German arms manufacturers win most of the government’s military orders. p In the late sixties, the arms race was whipped up to a frantic pace in other NATO countries as well. As a result their military spending shot up from 61,300 million dollars in 1960 to 106,400 million in 1971. Between 1949 and 1971, NATO’s direct military expenditures amounted to 1,580,000 million dollars, of which the USA provided some 75 per cent. p In the past few years, resurging Japanese militarism has been showing signs of renewed activity. In Japan, a country which has suffered the horrors of atomic bombing, influential political circles are openly calling for bringing Japan’s military power into line with her economic potential. The 25th Congress of the ruling Liberal-Democratic Party early in 1971 significantly took a decision to launch a campaign for "regaining northern territories”. Former Prime Minister Eisaku Sato went so far as to declare openly that this was the "greatest task" facing Japan. Japan’s rapidly growing economic potential is being used by its reactionary circles to build up the military machine, to the accompaniment of revanchist slogans and open claims to parts of Soviet territory. p Japan’s military spending rose from 421 million dollars in 1960 to 1,864 million in 1971. The Japanese Government has plans to step up their military-economic activity. Evidence of this comes from the draft of the fourth five-year programme covering the period 1972/73 to 1976/77. Under this programme, expenditure on the development of Japan’s 28 armed forces is slated to total 5,200,000 million yen. By comparison, between 1967/68 to 1971/72 the total was only 2,340,000 million yen and 1,160,000 million yen between 1962/63 and 1966/67.

p Israel has become one of the world’s most militarised states. Israeli militarism is an arm of world imperialism. Having seized a large part of Arab territory the Tel Aviv aggressors arrogantly refuse to withdraw their troops from all occupied lands, ignoring thereby a major prerequisite for a political settlement of the Middle East crisis. The recent outbreak of hostilities in the Middle East was another evidence of the Israeli military circles planning to annex the lands seized from the Arabs and to occupy more territory. Israel has launched a feverish drive to strengthen her armed forces. The Israeli war budget for 1972/73 broke the record at some 5,300 million Israeli pounds. [28•1 p The USA, the strongest imperialist power economically and militarily, has lavished colossal material and financial resources on the maintenance and reinforcement of its immense military machine (see Table 3). p The growing aggressiveness of US imperialism and the escalation of the war in Indochina were accompanied not only by an increase in war expenditures colossal as they are, but also by a steady rise in the proportion of that expenditure in the overall militaryeconomic activities of the capitalist world. Indeed, whereas in 1966 the USA accounted for 45.2 per cent of the combined strength of the armed forces of the capitalist countries and for 69.4 per cent of the total military spending of the advanced capitalist states, by 1970 the corresponding figures were 48.6 per cent and 71.1 per cent (see Table 3). p In the sixties, and especially since 1965, when the escalation of the Vietnam war began, there has been a rapid increase in the strength and equipment of the US armed forces. The ground and naval forces have been increased the most. The United States’ transition from the strategy of "massive nuclear retaliation" to that of "flexible response" and the growing demands of the Vietnam war were the reasons 29 Table 3 Summary of US Active Military Personnel and Forces (June 30) Fiscal Years 1951 1965 1967 1970 1973* 1974’ Military personnel (thousands) Army ......... 858 968 1,442 1,322 825 804 Navy ......... 627 671 752 692 574 566 Marine Corps ..... 177 190 285 260 197 196 Air Force ....... 820 824 897 791 692 666 Total, Department of Defence ..... 2,482 2,653 3,376 3,066 2,288 2,233 Strategic forces Intercontinental ballistic missiles Minuteman .... 800 1,000 1,000 1,000 1,000 Titan II ..... 54 54 54 54 54 Polaris Poseidon submarines/missiles** 5 0 29 0 41 656 41 656 41 656 41 656 Strategic bomber squadrons ....... 40*** 30**** 30 28 General purpose forces Land forces Army divisions . . . 11 16 17 17V. 13 13 Marine Corps divisions 3 3 3 3 Tactical Air Forces Air Force wings . . . 22*** ... 23 21 21 Navy attack wings . . 15 15 13 14 14 Marine Corps wings . . 3 3 3 3 Naval forces Attack and antisubmarine carriers .... 24 25 23 1£ If 15 Nuclear attack submarines 13 21 28 41 6C 64 30 Fiscal Years 1901 1965 1967 1970 1973* 1974* Other warships ..... 438 404*** 330 309 256 Airlift and sealift forces C-5A aircraft squadrons . — — — 1 4 Other aircraft squadrons 32*** 17 13 13 Troopships, cargo ships and tankers ..... 101 106 130 113 63 57 p * Estimate.

p ** Numerator indicates the number of submarines, denominator, the number of missiles. p *** Data for 1968. p **** Data for 1972. Sources: The New York Times, January 25, 1966, p. 22, and January 25, 1972, p. 16; The Budget of the United States Government, Fiscal Year 1970, Washington, 1969, p. 75, and Fiscal Year 1974, p. 79. behind renewed interest in the conventional armaments. The USA, however, was attaching prime importance to building up and improving its strategic nuclear missile arsenal. In the middle of 1973 the US strategic offensive forces included 1,054 landbased ICMBs, dozens of submarines in commission capable of carrying 656 missiles and more than 500 manned bombers. The following data give an idea of the size of the US military machine. The Defence Department has a total of 470 major installations and more than 6,000 lesser facilities at home. The Pentagon owns 27.6 million acres of land. The value of real property alone is carried on Pentagon ledgers as exceeding 40,000 million dollars, while .the total value of property owned by the US armed forces is estimated at 210,000 million dollars. [30•1 31 Armed Forces and Military Expenditures of Imperialist States (1970) Armed forces Military expenditures thous. men percentage of total mil. dollars percentage of total Economically advanced countries ........ 6,484 3,161 2,873 98 259 100.0 48.6 44.3 1.5 4.0 107,604 76,507 26,2oO 1,325 1,582 100.0 71.1 24.4 1.2 1.5 USA ......... Western Europe and Canada ....... Australia and New Zealand ....... Japan ......... p Calculated from: The Military Balance 1970–1971, pp. 110–12; NATO Letter, December 1970, p. 23. p S 15665; p In late 1970, over one million servicemen were stationed outside the United States. The U.S. News and World Report’s map of the deployment of US forces overseas indicates that 237,500 servicemen were stationed in the Pacific and the Far East, 291,000 in Europe, the rest in Latin America and elsewhere. [31•1 p The USA has invariably attached great importance to setting up strategic bases on foreign soil. The network of such bases has particularly expanded since the last world war. The immense size of the military machine, the location of US military bases and areas where US military presence is outstanding clearly show that these are spearheaded against the socialist states and the national liberation movements in colonial and dependent countries.

p The US military machine is a tool of US imperialist policy. Its maintenance has stimulated the unprecedented rise of US militarism. The total strength of the US armed forces, including civilians, has exceeded 3.5 million, from an 32 average of less than 300,000 in the twenties and thirties. Since the last world war the United States has been spending roughly ten per cent of its GNP on direct military purposes as compared with less than one per cent before the war. p The US ruling circles and apologists of US imperialism are known advocates of using or threatening force to settle international disputes, alleging that force remains the decisive factor of world politics. Ex-President Johnson in his State of the Union message to Congress in January 1966 named the principle of force as the first of the five immutable guidelines of US policy in the post-war years. The US Administration, too, repeatedly stressed the importance of this principle in matters of foreign policy. p Before the Second World War, military work was usually curtailed once a war was over. US militarism in general was relatively underdeveloped and the military had but a minor role to play in US political affairs. The Second World War and the resultant expansion of military activities pushed the military to the foreground, enhancing their role in the state management and policy-making. Over the past few years, the military have gained new positions of influence by taking advantage of US military work on a scale yet unknown in peacetime. In contravention of the national tradition more and more military figures found their way to top government posts. General Eisenhower was President from 1953 to 1961, General George Marshall was Secretary of State in 1947– 48. p The military establishment has become a major factor in policy planning. p The Pentagon, the headquarters of US militarism, has come to epitomise the power of the military. A total of more than 26,000 employees—14,200 civilians and 11,800 military personnel—report for duty at the Pentagon each working day. [32•1 It has the biggest centralised bureaucratic apparatus in the world. By manipulating its huge budget, giant military machine and other tools, the Pentagon is invading almost every sphere of American life: the economy, politics, science, etc. 33 p The Pentagon’s enormous influence on US policy has been admitted by members of the US Congress. For example, Senator George D. Aiken said that some senators from states with big defence industries "are being prodded to support the war”. Congressmen oppose, as a rule, cuts in military appropriations, if they are detrimental to military contracts in their states. [33•1 p The US financial oligarchy is using government military work to achieve its political ends and to make fabulous profits. The military suppliers have a vested interest in the arms race and step it up whenever possible. This, in turn, increases the power of the military.

p Since World War II, the US imperialists have repeatedly used armed force to back up their ambitious plans. Between 1950 and 1953 they waged war against the people of Korea. In 1958 US marines invaded the Lebanon. In 1965 the US Army intervened militarily in the Dominican Republic. From 1955 to 1973 it waged its inhuman war in Indochina, the strength of the US forces directly involved in hostilities steadily increasing to top the half-a-million mark in 1968. p The USA, acting hand in glove with the Israeli aggressors and using its Sixth Fleet, is trying to topple progressive regimes in some Arab countries and retain its positions in the Middle East with its rich oilfields and great importance for military strategy. p The US ruling quarters have invariably resorted to all sorts of plausible pretexts to cover up their expansionist policies. Lenin wrote in this connection: "The American people, who set the world an example in waging a revolutionary war against feudal slavery, now find themselves in the latest, capitalist stage of wage-slavery to a handful of multimillionaires, and find themselves playing the role of hired thugs who, for the benefit of wealthy scoundrels, throttled the Philippines in 1898 on the pretext of ’liberating them, and are throttling the Russian Socialist Republic in 1918 on the pretext of ‘protecting’ it from the Germans.” [33•2 34 p After the Second World War, the United States sought to camouflage the true aims of its foreign policy and the tremendous scope of military-economic work involved by the need to protect the so-called "free world" against the alleged "military menace" from the Soviet Union and other countries of the socialist community. This fabrication was used as the chief argument to justify the cold war policy, the setting up of military-political alliances, the deployment of large armed forces and military bases of the United States abroad, its military interference in the internal affairs of other nations. This was accompanied by extolling military force as the decisive means of solving international disputes, by propaganda of the imperialist "policy of strength”. p The expansionist policy of the United States pursued on a global scale, however, was increasingly discrepant with the objective conditions of modern times and the real possibilities of US imperialism. The growing economic and military potential of the Soviet Union and other countries of the socialist community, the substantial change in the world balance of power in favour of socialism have become an insurmountable obstacle to the expansionist plans of imperialists. These historic factors have made perfectly clear the futility of the plans of the imperialist circles to attain a military superiority over the socialist system and by using military force to “liquidate” or at least "throw back”, “ contain” socialism, to dictate their will to it. p In the present situation, when the alignment of forces on the world scene is steadily changing in favour of socialism, democracy and peace, the national liberation movement is growing and the undivided rule of imperialism has become a thing of the past. The

effectiveness of military force as a means of solving disputes between states has markedly reduced. During 11-odd years, the United States waged war against the people of Vietnam. The strength of the US forces directly involved in the war in Indochina topped the half– amillion mark in 1969. The United States direct budgetary spending on this war ran into 140 thousand million dollars even according to official estimates obviously played down. But neither a huge army armed to the teeth nor the " scorched earth" policy helped US imperialism to win this war, 35 the longest in US history and the second largest in expense. (See Table 3a.) Table Sa USA War Losses In lives In wounded In million dollars In length, months Revolutionary War (April 1775 -November 1782) 4,435 6,188 75 92 War of 1812 (June 1812– February 1815) * 2,260 4,505 134 32 Mexican War (May 1846– February 1848) 1,733 4,152 166 21 Civil War (April 1861–1865) 235,000 382,000 4,000 48 Spanish-American War (April 1898-August 1898) . 385 1,662 576 4 World War I (April 1917– November 1918) . . 53,402 204,002 25,700 19 World War II (December 1941-August 1945) .... 291,557 670,846 341,000 44 Korean War (June 1950-June 1953) ..... 33,629 103,284 54,000 36 Vietnam War (December 1961 -January 1973) . . . 45,937 303,622 140,000 133 p Source: US News and World Report, February 5, 1973, p. 19. p The US Government had to sign the Paris Agreement on ending the war and restoring peace in Vietnam. This was a great victory for the Vietnamese people in their hard and long struggle for freedom, independence and peace. p The lessons of the war in Indochina indicate that today military force must not be the main factor of foreign policy. They also evidence that in today’s world, military conflicts, 36 crisis situations and arrogance of the role of a world policeman greatly endanger international security and may have disastrous consequences, for the United States as well. p The United States assumed the role of a world policeman and saviour of the capitalist system in the early postwar years, when it was the only power centre of imperialism, had absolute economic, political and military superiority over the other capitalist countries which were at the time greatly dependent on US imperialism. The United States continues to be the leading power of modern capitalism but it has lost its former hegemony as the economies of the West European countries and Japan have been rehabilitated and developed. During the 50s and 60s the balance of power in the capitalist world changed gradually, “ Americanocentrism” gave place to emerging “polycentrism” and the main imperialist rivals—the USA, Western Europe and Japan—came on the scene.

p This process was accompanied by a fall of the US share in the total industrial production of capitalism, a decline in the competitive power of American goods on world markets, a growth of the US payments deficit, a sharp devaluation of the dollar as the world currency, and an exacerbation of contradictions between capitalist states. The US economic positions in the world are weakening under the impact of various factors but largely due to the cold war policy and the arms race. The greater total and relative size of US military spending than in other countries aggravated its economic difficulties abroad and contributed to an exacerbation of its economic and social problems at home. p The steady growth of the economic and defence potential of the socialist community, the change of the alignment of forces on the world scene in its favour, the increased effectiveness of the peace policies of the Soviet Union and other socialist countries, the successes of the national liberation and working-class movements, the upsurge and growing influence of progressive public movements, the weakening of the world position of US imperialism and the exacerbation of imperialist contradictions, the disastrous consequences of the arms race, the growing economic, political and social problems facing the United States at home, compelled its more far-sighted leaders to realise at last the 37 untenability of the main conceptions of the cold war policy and to take a more realistic view of the objective conditions of the modern world, to seek other ways and means of attaining the goals of the US ruling classes. p This reassessment of US foreign policy began practically when the Administration of President Richard Nixon came into office in January 1969 as was expressed in particular, in the President’s foreign policy messages to the US Congress, the Nixon Doctrine, the new military strategy of "realistic containment" and other official decisions. The practical steps taken by the Nixon Administration evidence its departure from the dangerous cold war dogmas, its desire to come over from confrontation to negotiations with the socialist countries, to normalise relations with the Soviet Union. p The Soviet-American top-level talks which took place during Presiden Nixon’s visit to Mocow in May 1972, during the visit of General Secretary Brezhnev to the United States in June 1973 and during President Nixon’s visit to the Soviet Union in June-July 1974 largely helped normalise relations between the two great powers. The agreements they signed, in particular, the Treaty on the limitation of anti-ballistic missile systems, the interim Agreement on certain measures with respect to the limitation of strategic offensive arms and particularly, the agreement on the prevention of nuclear war, were the first concrete steps towards keeping back the arms race and reducing the threat of worldwide thermonuclear war. The Soviet Union and the United States proclaimed as the objective of their policies the elimination of the menace of a nuclear war and the use of nuclear weapons and gave a pledge to take action to rule out the outbreak of a nuclear war between themselves and between each and a third country. p The Soviet Union and the United States also agreed to continue active talks with a view to working out and preparing for signing a permanent agreement on wider measures to limit strategic offensive arms both in quantity and in quality.

p The series of treaties and agreements between the Soviet Union and the United States meet the vital interests of both the Soviet and the American peoples, since their aim is to prevent nuclear war, limit the arms race, develop mutually 38 advantageous economic, scientific, technical and cultural exchanges. Normalisation of Soviet-American relations is of great importance not only for the two countries but for the entire mankind as well. The Soviet-American summit meetings produced a healthy impact on the entire international situation, facilitated detente, helped put an end to the Vietnam war which had lasted for years, speed up preparations for the Conference on security and cooperation in Europe, etc. The positive changes in the relations between the Soviet Union and the United States reveal two important factors: first, the possibilities now available for solving disputable inter-state problems through negotiation on the principles of peaceful coexistence of states with different social systems and, second, new favourable prospects for taking advantage of these possibilities, for settling through negotiation international problems still outstanding, for further improving Soviet-American relations and achieving a more radical and stable amelioration of the climate in the world today. p The Soviet Union and other countries of the socialist community consistently implement coordinated comprehensive measures in order to stabilise, deepen and extend to the whole world the current process of political detente, to make it irreversible. At the meeting in the Crimea in July 1973 between leaders of the Communist and Workers’ parties of the socialist countries, it was emphasised that today "it is important to consolidate by joint efforts of all states concerned the positive changes on the international scene, to implement consistently the agreements and treaties concluded, to advance steadily towards the main objective— universal peace”. p The countries of the socialist community come out for political detente to be supplemented with military detente. The Soviet-American agreements on strategic arms limitation have a restraining influence on the arms race. For the first time in history they set a limit to stockpiling the most powerful and dangerous weapons, thereby ending the race in this field. As is known, the continued development of antiballistic missile systems on a large scale was fraught with the danger of a rapid escalation of the nuclear arms race. This menace have been substantially reduced by the treaty on anti-ballistic missile systems limiting their deployment to 39 one region in the United States and one in the Soviet Union. However, only the first few concrete steps have been taken, the first approaches have been made, and only partial agreements on limiting the arms race have been achieved. p The Soviet-American agreements, however, do not set limits to the improvement of arms quality, the development and production of more effective and destructive weapons, which may override the limits to stockpiles. The absence of restrictions on arms improvement is responsible for the continued dangerous race for scientific and technological superiority in the military field. Huge investments continue to be made in large and expensive programmes of development and production of new weapons systems. For example, the US Defence Department is pushing ahead with its programme of developing the B-l strategic bomber, the Trident missile submarine, and other types of weapons.

p Continued development and production of the most upto-date weapons systems may have disastrous consequences, because making these systems operational will result in a still greater increment in the huge destructive potential of military arsenals, an increase in military spending and a growing threat of the outbreak of a devastating thermonuclear war. p In this situation, the proposal of the socialist community for making requisite efforts to supplement the political detente now in progress in the world by a military detente merits attention as a matter of exceptional importance and urgency. A crucial role in solving this difficult problem could be played by an agreement to restrict arms improvement, the development of new weapons systems, the technological arms race. p With a view to reducing the arms race, the Soviet Union submitted to the 28th Session of the United Nations General Assembly as a matter of extreme importance and urgency proposal on the draft resolution calling on the permanent members of the Security Council to cut their military budgets by 10 per cent and to use part of the money thus released to assist the developing countries. The permanent members of the Security Council—the Soviet Union, the USA, France, Great Britain and China—account for the bulk of huge military outlays in the world today. The 40 United Nations General Assembly approved this businesslike and constructive proposal by a vast majority of votes. It requested all permanent members of the United Nations Security Council to cut their military budgets by 10 per cent from the 1973 level during the next fiscal year and to set aside 10 per cent of the funds released by curtailing military outlays for aid to the developing countries and called on other states also to cut their military budgets. p Agreement on troop and arms reductions would be an effective means of securing military detente. Today, the arms stockpiles of states have grown to a level where their use, particularly nuclear missiles, would cause irreparable damage to world civilisation. The only realistic way to offset this menace to the human race is to reduce military arsenals. A successful completion of the current Soviet-American talks on further strategic arms limitation and on troop and arms reductions in Central Europe which got under way in Vienna on October 30, 1973 may mark important progress in this direction. p As evidenced by the communique of the Crimean meeting between leaders of the Communist and Workers’ parties of the socialist countries, the socialist community regards these talks as crucially important. p Reinforcement of political by military detente would contribute to a radical improvement in the international situation and to creating a fundamentally new system of international relations in which disputes between states with identical or different social systems would be solved exclusively by peaceful means, without armed conflicts and wars. p The path towards this noble goal, however, is laden with great obstacles, such as the cold war inertia, the resistance of militarism, the military-industrial complexes and other reactionary forces. The socialist countries believe that these obstacles can be overcome

and are taking comprehensive and vigorous measures to this end. This extremely complicated problem of vital importance for all mankind can be solved only by pooling the efforts of all revolutionary and progressive forces of today, with joint and vigorous assistance from all states, particularly the Soviet Union and the United States. Speaking on American television, the CPSU General Secretary Brezhnev declared: "The climate prevailing in the 41 relations between our two countries has a large bearing on the general atmosphere in the world. Neither economic and military power, nor international prestige give our countries any additional rights but impose on them special responsibility for the destinies of universal peace, for preventing war. In its approach to the relations and contacts with the United States, the Soviet Union is fully aware of that responsibility”. A further improvement of Soviet-American relations in a spirit of mutual awareness of this lofty responsibility would be a major factor of progress in the international situation towards universal peace, delivering mankind from the threat of militarism and a new world war. *** TEXT SIZE

Notes [13•1] V. I. Lenin, Collected Works, Vol. 28, p. 62. [15•1] V. I. Lenin, Collected Works, Vol. 15, p. 192. [15•2] Ibid., Vol. 22, p. 17. [16•1] Ray Stannard Baker, Woodrow Wilson. Life and Letters, Vol. IV, New York, 1931, pp. 57 and 85. [18•1] Anna Rochester, Rulers of America. A Study of Finance Capital, London, 1936, p. 38. [18•2] V. I. Lenin, Collected Works, Vol. 25, pp. 415–16. [18•3] Harvey F. Fisk, The Inter-Ally Debts. An Analysis of War and Post-War Finance 1914–1923, New York-Paris, 1924, pp. 23–39. [19•1] Historical Statistics of the United Stales. Colonial Times to 1957, Washington, 1960, p. 649. [19•2] V. I. Lenin, Collected Works, Vol. 28, p. 64. [20•1] The Roosevelt Reader, ed. by Basil Rauch, New York, 1957, p. 225.

[21•1] A. M. Alexeyev, Military Finance of Capitalist States, Moscow, 1952, p. 61 (in Russian). [22•1] Statistical Abstract of the United States, 1959, p. 244. [23•1] L. S. Amery, The Washington Loan Agreements. A Critical Study of American Foreign Policy, London, 1946, p. 106. [24•1] Pravda, April 10, 1969. ’ [28•1] The Military Balance 1972–1973, London, 1972, p. 31. [30•1] Congressional Record, November 1, 1967, Vol. 113, p. Statistical Abstract of the United States, 1970, p. 249. [31•1] U.S. News mid World Report, December 28, 1970, pp. 20–21. [32•1] Clark R. Mollenhoff, The Pentagon. Politics, Profits and Plunder, New York, 1967, p. 27. [33•1] Congressional Record, November 1, 1967, Vol. 113, p. S 15666. [33•2] V. I. Lenin, Collected Works, Vol. 28, p. 63.

2. US MILITARY ACTIVITIES AFTER THE SECOND WORLD WAR

p The main items on the list of US military needs are financed out of the federal budget. The USA uses it to maintain and reinforce not only the national armed forces but also those of its allies, to bolster up reactionary regimes throughout the world, to carry out the imperialist policy, and organise military ventures and other actions to serve the US ruling monopoly circles. Generally speaking, US military expenditures can be described as monetary outlays for current and future wars and for the backlog of payments connected with past wars. p The bulk of military work in the capitalist countries is financed out of the budgets of the defence ministries and military departments. To conceal the actual volume of this work and for other practical reasons, the governments of bourgeois states often finance what amounts in effect to military needs of the “civilian” part of the state budget. p Soviet economists rightly argue that actual military spending in capitalist countries includes an “invisible” part added to the regular outlays of military departments. Military expenditures are usually divided into direct and indirect. The former is spending by defence ministries; the latter is that from the “civilian” part of the state budget (i.e., invisible military expenditure). This classification according to the heading of a particular expenditure item adopted in the 42 capitalist budgets obscures the true purpose of individual items of military spending and the difference between them. Under this classification, US indirect military expenditure must include, for example, spending by the Atomic Energy Commission and that on veterans benefits although they widely differ in purpose. p It would be correct, therefore, to supplement the accepted departmental principle of demarcation of military outlays with a classification based on their functional purposes, i.e., their influence on the country’s military power. For this purpose, all types of military spending may be divided into two basic groups: (1) the cost of maintaining and reinforcing the country’s military power and military-economic potential in peacetime and the cost of military operations in time of war; (2) outlays unconnected directly with the maintenance of military power but involved in the repair of war damage or linked with earlier military work. The first group of expenditures may be described as direct, or active; the second, as indirect, or passive.

p In our view, the proposed classification according to purpose presents a correct picture of military work. The size and share of current direct military expenditures show how a country builds up her military potential, while her indirect military spending indicates the scope of her past military work and the extent of earlier war damage. p Direct military expenditures include above all spending involved in the upkeep and training of military personnel, supplying them with weapons and military equipment, the building of various military facilities and installations, the development of weaponry and arms manufacture. Indirect military expenditures are those involved in rebuilding what has been destroyed by war, the payment of pensions, the settling of the national debt, etc. p The above classification is also essential for forecasting the economic implications of disarmament. In case agreement is reached on general and complete disarmament only direct military appropriations will be stopped, while indirect spending will, most likely, be immediately increased since the disbandment of armies will result in greater disbursements on veterans benefits and other indirect military outlays which are to be curtailed gradually. It will probably 43 take time to reduce them to naught. The intricate, confusing classification of US budgetary appropriations precludes an accurate estimate of military outlays which are distributed under different headings of the federal budget. To estimate, if only roughly, the full US military expenditures, the distribution of budgetary allocations under the various headings of the federal budget need be analysed. p Direct military expenditures are above all those of the Defence Department which consumes the bulk of all military outlays. The Defence Department budget includes also pensions to ex-servicemen—indirect military expenditure which accounts for a fraction of the Defence Department’s total. For this reason, all Defence Department expenditures are regarded as direct in our further analysis. Others of their kind include spending by the Atomic Energy Commission, on foreign military “aid” and the stockpiling of strategic materials. In official statistical publications the above expenditures are bracketed together with those of the Defence Department under one heading: "National Defence”. Another type of direct military expenditure is that on space exploration (see Table 4). In our view, the above items of expenditure should be classified as patently direct military expenditures, i.e., those used to build up the US military machine. p Apart from direct and indirect military expenditures, there are the so-called invisible military outlays listed under a variety of “civilian” headings of the federal budget. For instance, listed under the heading "International Affairs and Finance" are expenditures on foreign economic aid, part of which, as Americans themselves admit, is military aid. Other measures related to US military schemes are also financed under this heading. p The budget of the US Treasury has a provision for the maintenance and development of the Coast Guard. The Coast Guard is assigned strictly military tasks and according to legislation is to be placed immediately at the disposal of the Defence Department in the event of war. In 1963/64 expenditures on the Coast Guard totalled 350 million dollars, in 1965/66 397 million. [43•1 Large military outlays are “hidden”, 44 Table 4 Budget Outlays by Function (thousand million dollars) Fiscal years 1965 19G7 1970 197.T

1974’ National defence ....... 49.6 4.3 5.1 4.8 2.0 7.4 0.3 2.3 1.7 25.7 5.7 10.4 2.2 —3.1 70.1 4.5 5.4 4.4 1.8 7.6 2.6 5.9 0.7 31.2 6.9 12.6 2.5 -3.9 80.3 3.6 3.7 6.2 2.5 9.3 3.0 7.3 13.0 43.8 8.7 18.3 3.3 -6.4 76.4 3.3 3.1 6.1 3.9 12.5 4.0 10.5 18.0 75.9 11.8 22.8 5.6 6.8 8.4 0.5 81.1 3.8 3.1 5.6 3.7 11.6 4.9 10.1 21.7 82.0 11.7 24.7 6.0 6.0 —9.2 1.8 International affairs and finance Space research and technology Agriculture and rural development ........... Natural resources and environment ........... Commerce and transportation Community development and housing .......... Education and manpower . . . Health ............ Income security . . Veterans benefits and services Interest ........ General government ..... General revenue sharing . . . Intergovernmental transactions Allowances ......... Total ......... 118.4 158.3 196.6 249.8 268.7 p * Estimate. Sources: The Budget of the United States Government, Fiscal Year 1972, pp. 569–73, and Fiscal Year 1974, p. 67. for instance, in the budgets of the Department of Justice (which finances the Federal Bureau of Investigation), the State Department and the Central Intelligence Agency. The US Administration spends through the federal budget considerable funds on military mobilisation work, to develop the infrastructure (the building of roads, airfields, ports, etc.) and other projects of both civilian and military importance. 45 p The fact that many types of expenditures, which are, in effect, military, are listed as civilian is admitted by American authors, too. For instance, Neil H. Jacoby has divided the federal budget allocations into four groups according to their military use. [45•1 His calculations reveal that over 85 per cent of the total administrative budget allocations is spent on the "global concept of defence”. At the same time, he lists as military outlays some types of civilian spending. p Some categories of US military expenditure are reflected on the revenue side of the budget. To stimulate military work by monopolies and in some cases by individuals (the building and operation of military-industrial enterprises, civil defence facilities, etc.) the US Administration grants them tax reliefs, the right of accelerated amortisation, and other privileges which do not affect the military part of the budget but reduce its revenues and are, in effect, military spending. p It may be concluded that the US direct and indirect military expenditure amounts on average to nearly a half of the federal budget’s total. Since “invisible” military expenditures cannot be determined exactly, only direct and indirect military spending is discussed here to show the growth and structure of US military spending. This understates somewhat the overall size of military expenditure. The exclusion of the invisible military expenditures from our estimates is compensated for, to a certain extent, by the fact that minor civilian outlays are listed under some headings of patently military expenditures. For instance, according to US publications, roughly 30 per cent of the expenditure of the Atomic Energy Commission goes for civilian needs.

p Direct and indirect military expenditures account respectively for some three-fourths and one-fourth of the total federal military outlays (see Table 5). p The absolute and relative size of obviously direct military expenditures varies within wider limits than indirect military expenditures owing to alterations in current and longterm military programmes. The scope of military work involved increases or reduces relatively more quickly. The 46 Table 5 Military Expenditures in the Federal Budget Item of Expenditure Fiscal years 1965 1967 1970 1971 1973* Total federal budgetary expenditure (thousand million dollars) ........ of which military spendings (per cent) . . . Direct military outlays .... Department of Defence . . . Atomic Energy Commission . Defence-related activities . . Foreign military aid .... NASA ... Indirect military spending . . National debt settlements . . War veterans benefits and services 118.4 60.3 46.7 39.1 2.2 0.1 1.0 4.3 13.6 8.8 4.8 158.3 60.0 47.7 42.5 1.5 —0.3 0.6 3.4 12.3 8.0 4.3 196.6 56.5 42.8 39.2 1.3 0.4 1.9 13.7 9.3 4.4 212.8 51.3 37.5 34.4 1.1 -0.1 0.5 1.6 13.8 9.1 4.7 249.8 45.7 31.9 29.7 0.9 —0.2 0.2 1.3 13.8 9.1 4.7 p * Estimate. Sources: The Budget of the United States Government, Fiscal Year 1972, pp. 569–73, and Fiscal Year 1974, pp. 364–67. volume of indirect expenditures, however, is determined by past military work and the resultant national debt, an increase in the number of war veterans, and some other factors. Government obligations involved in past military work are less subject to change, while the absolute size of US indirect military expenditure shows a tendency towards a steady increase. p At no period of American history have US military expenditures in time of peace swallowed up such a big portion of total budgetary allocations as has been the case since the last world war. Over the past few years, all direct and indirect expenditures amounted to more than half of the federal budget total, whereas in the twenties and thirties they accounted for some ten per cent. Again, whereas formerly direct military spending amounted to one-third of the total military expenditures in peacetime, today it accounts for 47 three-fourths. This indicates that since the last world war, the US Government has been carrying military activities on a vast scale even in peacetime, whereas before the Second World War military expenditures were connected mainly with past military work, war pensions, etc. p The US war of aggression in Korea (1950–53) gave a strong impetus to the growth of US militarism and the arms race. In 1949/50, the US "national defence" expenditures stood at 13,000 million dollars, whereas by 1952/53 they had grown to 50,400 million. The strength of the US armed forces in 1953 was 3,555,000 as against 1,615,000 in 1949.

After the Korean war, US military appropriations stopped to grow for a time and became stabilised, but intensive military work was continued. p The US military expenditure again climbed steeply in the early sixties. In 1959/60 the US “defence” appropriations amounted to 45,700 million dollars; in 1961/62 to 51,100 million; in 1963/64 to 54,200 million. The escalation of the US war in Vietnam stimulated another increase in war spending. p For several years the Administration published obviously understated figures of expenditure on the Vietnam war. The data in Table 6 show that its increasing involvement in this war was the main reason behind the steep rise in the total Defence Department spending in the latter half of the sixties. According to the American press, the USA has spent an estimated 150,000 million dollars on the Indochina war. p By our estimates, the federal expenditure per US serviceman in Indochina was much larger than in all previous US wars. Thus, official statistics of Vietnam war expenditure per serviceman gave about 60,000 dollars (based on price index for 1957–59). By comparison, in 1953 the corresponding figure for the Korean war was 15,000. This steep rise in the US war expenditure was attributable to the intensive use and raising costs of military equipment, as well as to payroll increases for US servicemen in Vietnam. p According to US publications and some official statements by Pentagon spokesmen, the actual expenditures on the Vietnam war were larger than the official figures indicated. The reason is dual: first, the ruling circles want to conceal the true cost of the war; secondly, it is difficult to estimate the 48 Table 6 Department of Defence Expenditures Attributable to the Vietnam War Total Defence Expenditure Vietnam war expenditure Fiscal year Dept. spending (mil. dollars) minus Vietnam war spending (mil. dollars) mil. dollars percentage of total Defence Dept. spending 1965 46,173 46,070 103 0.2 1966 54,409 48,597 5,812 10.7 1967 67,466 47,333 20,133 29.8 1968 77,373 50,826 26,547 34.1 1969* 77,790 48,978 28,812 37.0 1970* 78,471 53,074 25,397 32.3 p * Estimate. Source: The Budget of the United States Government, Fiscal Year 1970, p. 74. costs of all varied military-economic activities involved in that war and distributed under different budget headings. The Joint Economic Committee, for instance, following hearings on the economic effect of Vietnam spending, reported: "It is probable that actual expenditures for the Viet Nam war exceed the official figures by an appreciable margin. The Department of Defense has conceded that it is somewhat unrealistic to establish a definitive distinction between Viet Nam outlays and other defense disbursements.... While the absence of any better guidelines makes it necessary to use these figures, it should be realized that the full effect is probably greater than they indicate.” [48•1 p The growing inflation and inflationary price rise in the USA is another cause of increase in military expenditure since the Pentagon has to pay more and more to procure

the same amount of military goods and services. The real trends in the Pentagon spending are shown in the table below. Thus, in the sixties, the Defence Department spending in prices of 1957–59 rose by 59 per cent or 4.7 per cent a year on the average. 49 Fiscal year Expenditure (thous. mil. dollars) Fiscal year Expenditure (thous. mil. dollars) 1960 40,929 1966 51,378 1961 43,197 1967 63,587 1962 46,535 1968 67,733 1963 48,108 1969 69,708 1964 49,512 1970 64,944 1965 45,047 p All direct military outlays authorised in the US federal budget (spending of the Pentagon, the AEG, NASA, and other) amount to over 80 thousand million dollars a year. According to official data, obviously played down, the United States’ so-called "national defence" spending during the fiscal years 1960/61–1970/71 added up to over 700 thousand million dollars. p In the 50s and 60s, the American leaders believed that with the US economic potential they could afford the maintenance of huge armed forces to pursue a global expansionist policy, to act as a "world policeman”. According to views current at the time, the United States could afford military outlays equivalent to 15 per cent of the gross national product during an indefinite period without overstraining the country’s economy. p The discrepancy between the expansionist plans and the actual economic and financial possibilities of the United States became particularly glaring towards the late 60s. The high growth rates of military spending largely attributable to the war in Indochina became a major cause of growing economic and financial difficulties of the United States: an increased federal budget deficit and negative balance of payments, soaring inflationary price rise, a reduction of the gold reserves, devaluation of the dollar and a deterioration of its status as the world currency, a weakening of the economic positions of US imperialism abroad. The public at large and the US leading quarters had to admit that the unrestrained arms race and political adventures abroad weakened the country’s economic potential, exhausted its finances and exacerbated its socio-political problems. It became clear that even the richest capitalist power could not 50 afford tremendous regular military expenses in face of its domestic economic and social problems. p The sharp exacerbation of these problems was evidence of a crisis in the economic foundations of the United States military-political line; it indicated that a continuation of this policy would undermine the economic and social basis of American society. This obvious fact was one of the main reasons for the more far-sighted American leaders to reassess the country’s political and military-strategic policy with due regard for its actual economic and financial possibilities, to take steps to slow down the arms race. These considerations influenced to a large extent the decisions to change US military policy, to end the war in Vietnam, to conclude the agreements and treaties with the Soviet Union, and other practical measures taken by the Nixon Administration.

p In view of the disastrous socio-economic effects and the growing public discontent with the arms race policy the Nixon Administration began its term by slightly reducing the military spending. Since the fiscal year 1971/72 military appropriations have been climbing again. Although the war in Vietnam has been ended, the US Government contemplates a notable increase in military spending in the coming few years. As demonstrated by President Nixon’s message on the budget, military outlays are to grow to 81.1 thousand million dollars in fiscal 1974 (4.7 thousand million dollars more than in fiscal 1973) and to 85.5 thousand million in fiscal 1975. p The increase in military outlays is mainly attributable to the effort of the US Department of Defence to continue a military build up by modernising armed forces, especially strategic sea-based forces. For this purpose, intensive work is in progress on new strategic offensive arms and other weapons systems. The development and production of sophisticated and costly up-to-date weapons systems demand huge outlays. For example, according to American press reports, the total spending on the programme of developing and manufacturing the B-l strategic bomber will run into over 11 thousand million dollars. According to the US Department of Defence, the estimated cost of one Bl aircraft, taking account of the total spending on the programme as 51 a whole, including R & D outlays, will amount to 45.G thousand million dollars. The continued development and manufacture of new weapons systems to secure improvement in armaments is fraught with the danger of a new escalation in the arms race. p The total and relative scale of US military spending in the near future will be dependent on many factors and, mostly, on changes in the policy, economy, strategy and military technology of the United States, as well as on the international situation. It is difficult to make an exact forecast of the impact these rapidly changing factors will have on the volume and structure of US military outlays in the coming few years. It can be assumed, however, that if no changes are made in the current military plans and programmes of the United States, the upward trend in its military spending will continue in the coming few years as well. According to estimates of Brookings Institution, towards 1978 the US military budget in current prices may go up to 104 thousand million dollars, almost 25 per cent more than what was requested for the fiscal year 1974. p Heated debates are under way in the United States on the order of priorities in the allocation of government resources for military and civilian purposes, on the effectiveness of continued military spending at its present enormous rate, and fairly well grounded ways and means to reduce it are proposed. p For example, in September 1973, Senator Hubert Humphrey tabled a resolution demanding a 5-7 thousand million dollar cut in the US military budget, the funds released to be spent on education and social security. In the summer of 1973, Brookings Institution published a report containing well-considered suggestions for cutting US military spending by 10–25 thousand million dollars a year through a reassessment of its military strategy and the organisation of its armed forces.

p To put an end to the arms race is a No. 1 problem. At the World Congress of Peace Forces which met in Moscow from October 25 to 31, it was specially emphasised that the peoples of the world should no longer put up with a situation in which the world’s huge resources are squandered on military work. The appeal adopted by the Congress said in 52 particular: "The atmosphere of detente should be used for a practical solution of the problem of preventing the arms race and achieving disarmament.” p A restraining influence on the arms race is produced by the Soviet-American treaties and agreements on strategic arms limitation. These agreements create favourable prerequisites for new talks on limitation of military work. An agreement to limit the development and production of weapons systems of the latest design would be of primary importance for slowing down and ending the continuing arms race. Implementation of the resolution calling on the permanent members of the Security Council to cut their military budgets by 10 per cent and to use part of the money thus released to assist the developing countries adopted by the UN General Assembly on the initiative of the Soviet Government would be a major real step to ending the arms race. Termination of the arms race is in the vital interests of all the peoples, including the American people. A substantial reduction in military spending and disarmament would relieve the world of the arms race burden and make it possible to switch over the manpower, material and financial resources released to solving the outstanding acute economic and social problems, the problems of environmental pollution control, greater aid to the developing countries and to attaining many other civilian objectives put off year after year for lack of funds. An end to the arms race is necessary, above all, for securing military detente, eliminating the danger of a world war and strengthening peace throughout the world. *** Notes [43•1] The Budget of the United States Government, Fiscal Year 1966, p. 290. [45•1] Planning and Forecasting in the Defense Industries, ed. by J. A. Stockfish, Belmont, 1962, pp. 3–4. [48•1] Congressional Record, August 29, 1967, Vol. 113, pp. S. 12401– S 12402.

CHAPTER II MILITARISM AND THE ECONOMY 1. THE ROLE OF THE ECONOMY IN WAR

p There is a close relationship between war and the economy. A country’s economic potential is the decisive factor of its military power. In antiquity, the Middle Ages and in the early period of capitalism, this relationship was hardly appreciable. In those times, economically backward states often won their wars against more advanced and larger states, because the course and outcome of a war were decided mostly by the numerical strength of the opposing armies, the standards of their training and organisation and their mastery of the art of warfare. This is illustrated by the military defeats inflicted on the European peoples by the Huns, the Mongols, and Ottoman Turkey. p As productive forces developed and weapons of war became more sophisticated, the dependence of war on the economy grew, as did the absolute and relative demand for material resources and manpower during military conflicts. This was pointed out in their day by the classics of bourgeois political economy. Adam Smith, for one, wrote: p “The great change introduced into the art of war by the invention of firearms has enhanced still further both the expense of exercising and disciplining any particular number of soldiers in time of peace, and that of employing them in time of war. Both their arms and their ammunition are become more expensive.... In modern times many different causes contribute to render the defence of the society more expensive.... 54 p “In modern war the great expense on firearms gives an evident advantage to the nation which can best afford that expense, and consequently, to an opulent and civilized, over a poor and barbarous nation.” [54•1 p The founders of Marxism were the first to give an exhaustive scientific explanation of the dependence of war on the economy and of the impact of progress in weaponry on the methods of warfare, on the concepts of military art. In a letter to Engels, Marx wrote: "Is our theory that the organisation of labour is determined by the means of production confirmed anywhere more splendidly than in the manslaughtering industry?” [54•2

p In his writings, Engels, a brilliant expert on military matters, dealt with problems of war in great detail. Referring to the relation between war and the economy he wrote in AntiDiihring that "nothing is more dependent on economic prerequisites than precisely army and navy. Armament, composition, organisation, tactics and strategy depend above all on the stage reached at the time in production and on communications. It is not the ’free creations of the mind’ of generals of genius that have had a revolutionising effect here, but the invention of better weapons and the change in the human material, the soldiers; at the very most, the part played by generals of genius is limited to adapting methods of fighting to the new weapons and combatants.” [54•3 p In his works, Engels traces the history of changes in the art of war brought on by advances in military technology, pointing out in particular the new elements introduced by the revolutionary war the insurgent North American colonies waged against Imperial Britain. That war was quite unlike feudal wars. The American rebels had revised not only the methods of warfare but also the very content of war. They were fighting a revolutionary war for their freedom and independence. p Large manpower and material resources are required to prepare and wage war. The quality and quantity of means 55 of warfare vary with the development of productive forces. The history of wars shows that the development of military technology involves an absolute and relative increase in material expenditure on the preparation and conduct of wars. It has been estimated that 19th-century wars consumed an average of 8 to 14 per cent of the national incomes of the belligerents, the first and the second world wars just under 50 and over 50 per cent respectively. p As Engels described it, the Franco-Prussian War of 1870– 71 marked a turning-point in the history of the art of war, militarism and the arms race. Engels wrote: "The army has become the main purpose of the state, and an end in itself; the peoples are there only to provide soldiers and feed them. Militarism dominates and is swallowing Europe.” [55•1 p In the imperialist epoch, militarism and the arms race have assumed a vast scope and spread to all continents. The law of the uneven economic and political development of capitalist countries under imperialism results in a disturbance of the balance of power among the bourgeois states followed by wars for a redivision of the world "according to power”. But since the transition of capitalism to its imperialist stage has greatly enhanced the importance of market outlets and raw material sources and has strengthened economic and political ties between individual countries, even a minor military conflict is likely to affect the interests of many nations. As a result, wars have grown in scope and intensity. For instance, within the first half of this century, the imperialist rivalry for a redivision of the world plunged the mankind into two sanguinary world wars. The First World War involved a total of 36 countries which committed some 70 million officers and men to the battlefield. World War II involved 61 countries and a total of 110 million officers and men. p World War I differed from all previous wars in scope and character. It saw the advent of novel types of armaments and combat equipment, such as aircraft, machineguns,

motorised heavy artillery, tanks, and so on. For the first time in history the belligerents used combat equipment driven by internal combustion engines. 56 p The vast scale of hostilities in World War I, the appearance of new, sophisticated types of weapons and combat equipment combined to swell the demand for material resources to be used in war. For instance, at the height of hostilities between 1914 and 1918 the daily consumption of ammunition exceeded that expended in the Franco-Prussian War of 1870–71. The weight of metal fired in a single offensive of the American forces on the Continent in 1918 was greater than the total used by the North in the whole of the Civil War of 1861–65. [56•1 p The first few days of World War I showed that the stocks of armaments and ammunition accumulated prior to the outbreak of hostilities were insufficient for the continuation of the war and that the General Staffs of almost all the belligerents had overrated the amount of war supplies at their disposal and had failed to anticipate the actual requirements of the impending war. It became perfectly clear that the government arsenals alone were incapable of meeting the needs of the war which made qualitatively new demands on the economy and called for gearing the bulk of the belligerents’ economic potential to the war effort. In 1918, the share of war production in total industrial output was 75 per cent in Germany and France, 65 per cent in Britain, and 40 per cent in the USA. The total of basic types of weapons and material produced by the main belligerents in the First World War is shown in Table 7. p The mobilisation of the economic resources and the organisation of arms production on a vast scale made it possible to make up for the current losses on the battlefield and to improve substantially the equipment of the armed forces. Indeed, on the eve of the war the armies of the West European countries had an average of 400 rubles’ worth of weapons and equipment per serviceman, whereas towards the end of the war the figure rose to 2,000 rubles. [56•2 p The colossal claims of the war upon material resources compelled the belligerent powers to place their entire economy on a war footing. The imperialist war accelerated the 57 Table 7 g P Production of Armaments and Military Equipment in World War I (1914–18) (thous. pcs) Types of armament and equipment USA Germany Britain France Austro-Hungary Russia Italy Total Rifles . . . 3 500 8,547 3 854 2 500 3 500 3,300 2,400 27,601 Heavy machine-guns . . 75.0 280 239.0 87.0 40.5 28.0 101.0 850.5 Submachine-guns .... — — — 225.0 — — — 225.0 Artillery pieces .... 4.0 64.0 26.4 23.2 15.9 11.7 6.5 151.7 Mortars 0.6 12.0 2.5 3.0 __ _ ._ ____ 18.1 Tanks ....... 1.0 0 1 2.8 5.3 _ 9.2 Aircraft 13.8 47 3 47.8 52.1 5.4 3.5 12.0 181.9 Ordnance ammunition (mil.) ........ 20.0 306.0 218.0 290.0 80.0 67.0 70.0 1,051.0 Small arms ammunition (thous. mil.) ..... 3.5 8.2 8.6 6.3 4.0 13.5 3.6 47.7 Motor vehicles 30.0 65.0 87.0 110.0 __ 20.0 28.0 340.0 z D Pi n o o Source: Militarism. Disarmament, Handbook, Moscow, 1963. p. 17 (in Russian).

58 development of monopoly capitalism into state-monopoly capitalism. The vast scale of hostilities dictated the need for government interference in national economic affairs. Lenin wrote in this connection: "Monopoly capitalism is developing into state-monopoly capitalism. In a number of countries regulation of production and distribution by society is being introduced by force of circumstances. Some countries are introducing universal labour conscription.” [58•1 p Lenin repeatedly emphasised the decisive role of the economy in war. In his article "On a Businesslike Basis" he pointed out that "to wage the war in earnest we need a strong and organised rear. Even the best of armies, even people most sincerely devoted to the revolutionary cause will be immediately exterminated by the enemy, if they are not adequately armed, supplied with food and trained.” [58•2 In another work Lenin wrote: "Victory in war goes to the side whose people has greater reserves, greater sources of strength and greater endurance.” [58•3 The all-important role of the economy as the material and technical basis for war was dramatically demonstrated during World War II, which saw radical changes in the methods and means of warfare, the use on a vast scale of new, more effective means of destruction. The use of machines assumed a mass scale, and the degree of mechanisation of military operations sharply increased. In 1914, there was an average of 0.3-0.4 h.p. of mechanical energy per serviceman, in 1918, 1.5-2.0 h.p., whereas on the eve of World War II the figure rose to 10 h.p. and more. [58•4 In the course of the war, the powertoman ratio continued to climb. The vast scale of hostilities, the advent of new, more sophisticated weapons and equipment led to a steep increase in the demand for material resources. To meet the needs of the war the belligerent powers had to gear to it the bulk of their economic and manpower resources, to place their entire economies at its service. The higher level of their productive forces enabled the belligerent capitalist countries to organise war production on a scale many times that during World War I. 59 Table 8 Production of Armaments and Military Equipment in World War II (1939–45) (thous. pcs) Types of armament and equipment USA Britain Germany 296.1 102.6 104.0 Tanks 86.5 25.1 65.1 253.0 113.8 174.5 110.0 48.3 82.0 14,623.0 5,415.0 12,309.0 Ordnance ammunition (mil.) Small arms ammunition 331.0 31.5 294.7 9.3 357.0 16.5 p Source: Militarism. Disarmament, p. 18. p The production of armaments and military equipment on such a vast scale was made possible by the intensive mobilisation of the economic resources and manpower of the belligerent countries for the war effort. According to some estimates, between 1941 and 1945 the share of military production in the total of US industrial output averaged 60.6 per cent. [59•1 p For the quantity of arms and equipment used on the battlefield, World War II surpassed by far World War I. During World War I, the American expeditionary force fired less than 10 million artillery and mortar shells, whereas during World War II US forces fired 8 million shells a month in Europe alone. The enormous demands of the war for weapons

and equipment, as well as their quick destruction on the battlefield, called for the all but full utilisation for war purposes of many types of equipment and raw materials at the disposal of the belligerents, their allies and even neutral states. p World War II showed that success in modern war largely depends on the quantity and quality of the economic resources available, on the efficiency and speed of mobilisation and 60 supply of fighting equipment and ammunition to the active forces. The war also demonstrated the difficulty and complexity of measures involved in placing the national economy on a war footing, in mobilising a nation’s material and manpower resources for large-scale production of sophisticated and labour-consuming military equipment. To start war production, it is necessary to build arms factories and supply them with industrial plant and raw materials. This, as well as the manufacture of end-products, takes time. This factor has great military significance in the sense that a country prepared for war well in advance has an enormous advantage over a country which is not and which, irrespective of the size and standard of her economic potential, finds herself at a disadvantage at least in the initial period of the war. Such was the situation during World War II when nazi Germany, fully geared for war, was able to achieve temporary successes early in the war with smaller economic resources than those of the Soviet Union and its Allies. p The experience of past wars shows that technological progress, the improvement and increasing sophistication of weaponry and methods of warfare went hand in hand with the increase in the importance of the economy, the level of the productive forces and science for a country’s militaryeconomic potential. The advent of missiles and nuclear weapons and other advanced and costly weapons of war enhanced the role of the economy and science in war. After World War II, other factors emerged which are responsible for new requirements for the economic preparation of wars. p First, it is the unprecedented growth of militarism in capitalist countries. The fact that modern militarism seeks to turn back the clock of history and preserve capitalism and the colonial system and that the military activities of the imperialist powers are directed primarily against the socialist countries combine to stimulate the unprecedented growth of the military establishment. p Second, it is the extraordinary sophistication and dynamic evolutions of modern armaments. The intensive use of scientific and technological achievements for military purposes, the unprecedented militarisation of science and large-scale military research and development (R&D) entail a rapid 61 increase in costs and labour intensity in the production of weaponry. The multiple increase in and the extremely high cost of modern armaments are illustrated by the following data: since the Second World War to date the cost of an aircraft carrier has grown from 55 million dollars to 750 million; a submarine, from 5 million dollars to 170 million; a destroyer, from 6.5 million dollars to 90 million; a bomber, from 0.5 million dollars to 25 million; a fighter plane, from 50 thousand dollars to 11.5 million; a tank, from 70 thousand dollars to 600 thousand dollars; a rifle, from 50 dollars to 164 dollars.

p Modern advances in military technology make it possible to develop a large variety of intricate weapons system with impressive performance characteristics. It is precisely this increased design complexity of weapons and equipment which is the main reason behind the greater labour-intensity of their manufacture and the rapid growth of prices for them. The manufacture of modern military equipment calls for immense outlays on R&D, the procurement of top quality special materials and costly radioelectronic equipment, adequate industrial facilities and the maintenance of skilled personnel. p Labour expenditure on the development of similar weapons systems can serve as an aggregate, summary index of the complexity of R&D involved. A total of 200,000 manhours was needed to develop the B-17 bomber (completed in 1937), 10 million manhours was spent on the B-58 (1957) and 15 million man-hours, on the XB-70 (1965). p The impact of R&D on labour intensity and consequently on the cost of weapons systems can be gauged from the following data. R&D spending involved in the building of nuclear-powered submarines in 1957/58–1960/61 amounted to 1,400 million dollars, or about 33 per cent of the total construction costs of the first 19 nuclear-powered submarines (4,200 million dollars). During World War II expenditure on designing a submarine accounted for 20 per cent of what it cost to build her, whereas in the sixties designing a firstline submarine cost as much as it did to build one submarine of her class. Table 9 illustrates the large share of R&D in the total cost of modern military equipment. p A sizable share of expenditure on military equipment goes to radioelectronic hardware. For instance, in 1962/63 it 62 Table 9 Cost of Research and Development Compared with Unit Cost of Production and Total Cost Equipment R&D cost Unit cost minus H&D Ratio of R&D to unit cost Number of R&D cost as percentage of the million dollars equipment total cost Leopard Tank (FRG) 25 0 275 91 1 500 5 7 TSR aircraft ( United Kingdom) Minuteman Missile, Version "C" (USA) ..... 700 450 5.6 3 0 125 150 100 300 56 33 Polaris Missile (USA) ..... 1,475 2.0 737 1,000 42 Source: The Review of Economics and Statistics, November 1967, p. 533. accounted for an average of 21 per cent of the total expenditure on the procurement of aircraft and warships, 35 per cent in the case of communication equipment and instruments, and 21.5 per cent in the case of ordnance, small arms, ammunition, tanks and armoured vehicles. With certain types of weapons systems radioelectronic equipment accounts for over half the total cost. For instance, in the case of air-to-air missiles with infra-red homing devices the cost of radioelectronic hardware accounted for 50–80 per cent, and in the case of guided tactical missiles, for 50–60 per cent. p The growth of military equipment prices is attributable not only to the increasing design complexity, which calls for considerable R&D outlays and extensive use of radioelectronic equipment, but also to the relatively small scale of production of certain types of equipment in peacetime, which precludes any appreciable reduction in production costs through automation and cutting the share of R&D outlays and other indirect expenditures.

p The growing sophistication and high cost of modern weaponry, as well as the drastic reduction in the average service 63 life of weapons systems due to their rapid obsolescence, call for increasing consumption of economic resources for the maintenance and expansion of a country’s military potential. There was time when armies could use their equipment until it became useless through wear and tear. The progress of military technology and the appearance of novel and more effective weapons systems compel armed forces to replace all obsolescent military equipment with new models. Therefore, fully operational weapons systems often have to be scrapped as obsolescent. For instance, the United States has discarded certain types of obsolescent aircraft, missiles and other weapons systems to replace them with new, more advanced models at an extravagant additional expense. p Military equipment develops and becomes obsolescent at a faster rate than civilian goods. The acceleration of obsolescence and increasingly shorter service life of military equipment inevitably lead to enormous additional expenditure of financial and material resources for military purposes. p These and other factors are responsible for the increase in the labour intensity and cost of war, the cost of maintenance of a single serviceman and a country’s armed forces as a whole. According to the American economist M. Slade Kendrick, average annual expenditure per US serviceman (in 1926 prices) was under 1,000 dollars between 1861 and 1865, 2,700 in 1898, 3,300 in 1918, 2,300-4,200 between 1922 and 1938. [63•1 According to our estimates, similar US expenditure (in 1926 prices) was 6,800 dollars in 1943 during World War II, 8,200 during the Korean war, 9,900 in I960, 10,900 in 1965 and 11,300 dollars in 1967. p An important factor requiring a new approach to the economic preparation of a modern war is the unprecedented destructive capacity of nuclear missiles and the fact that a country’s economy and rear have now become extremely vulnerable to attack. The imperialists know full well that should they unleash a nuclear war against the Soviet Union and other socialist countries their own territory will be immediately subjected to devastating nucler-missile retaliation. This awareness compels the imperialists to take measures well in 64 advance to prepare the population and the economy for a war emergency, ensure the survivability of the economy, develop large stand-by production capacities, accumulate stocks of strategic materials, etc. p The experience of past wars shows that as military technology develops it is necessary to spend more and more to achieve analogous war objectives. For example, in 54 B.C. Julius Caesar spent about 75 cents per enemy soldier killed, in 1800 Napoleon spent about three thousand dollars, in World War I the United States spent about twenty-one thousand dollars per man killed and in World War II about two hundred thousand dollars. [64•1 It has been estimated that during the Korean war, the USA spent up to 570,000 dollars per man killed. p In comparing these rather rough estimates one has to take into account the fact that unlike the past, when the primary target of military operations was enemy manpower, in

modern war prime significance is attached to destroying enemy military equipment, defence facilities, industrial centres and similar targets in the enemy’s rear apart from annihilating his armed forces. That is why for an assessment of the military effect in wars of different periods the number of enemy soldiers killed is not a very reliable criterion. p So far, there is no method for estimating the effectiveness of military expenditures by a universal index. The reason is that changes in military power and in the effects of its use call for examination of a large number of factors. In our view, a country’s military power can be gauged in two ways: p first, from the standard of her armed forces viewed irrespective of enemy power; a rough idea of that is given by their total firepower, and power-to-man ratio, logistical support and mobility, by the value of property in possession of the defence ministry, etc.; p second, from the prospective ultimate results of the use of her armed forces, i.e., their capacity to achieve major military-political objectives directly in the course of the war. 65 This calls for a special comparative analysis of her military power, possible belligerents and opposing coalitions, which is not the subject of the present volume. p This dual approach enables one to assess the effectiveness of military expenditures and make a comparison of the relevant indices to ascertain the effectiveness of different variants of solving concrete military problems both at the given stage in the development of military technology and in different historical periods. This method for the assessment and comparison of the effectiveness of military expenditures discloses the following historical tendencies: p 1. The growing effectiveness of military expenditures per unit of military power viewed irrespective of enemy power and the ultimate war objectives. The development of military technology is attended with reductions in unit cost of destructive power and means of its delivery to target. It is assumed that the destructive power of one H-bomb is several times that of all the explosives used in the history of wars, though its cost is probably a fraction of the latter’s. p 2. Although unit cost of military power tends to be cheaper, more and more funds are needed to prepare and wage war in terms of both total ancjf per capita expenditure. For instance, the US total direct military spending (in 1926 prices) grew from 1,394,200,000 dollars in 1938/39 to 42,280,300,000 in 1967/68. Over the period, direct military expenditures per serviceman grew 180 per cent to reach 11,919 dollars in 1967/68. Expressed in current prices, this expenditure amounted to over 24,000 dollars in 1967/68. p The tendency towards increased labour intensity in preparing and waging war is attributable to progress in military technology, the increased material support of armed forces and the improvement of weaponry, both offensive and defensive. This warrants the conclusion about the declining effectiveness of military expenditure for the achievement of ultimate war objectives, which largely depend on the alignment of opposing forces.

p So, the development of military technology is accompanied by two contrary tendencies: the growing effectiveness of military expenditures as far as the destructive capacity of armed forces is concerned and their falling effectiveness as regards the achievement of basic war objectives. 66 The history of wars shows that as military technology advances and means of warfare become more sophisticated, the interconnection between war and the economy becomes closer and the role of a country’s economic potential in the course and outcome of a war increases. The economy is the material basis for preparing and waging war and is the decisive factor of military power. However, it would be a mistake to assess and compare the military potential and power of different states solely on the basis of their respective economic potentials. The level of development and the scale of the economy provide objective prerequisites for and determine the ultimate limits of using the material and manpower resources for military purposes. Apart from the economy, military potential depends also on such factors as the mode of production, the moral and political strength of a country, the combat efficiency of her armed forces, the skill of her military leaders, the organising ability of the government, etc. *** Notes [54•1] Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, New York, London, p. 555. [54•2] Marx and Engels, Selected Correspondence, p. 218. [54•3] Engels, Anti-Diihring, Moscow, 1969, p. 200, [55•1] Ibid., p. 204, [56•1] Economic Problems of War and Its Aftermath, ed. by Chester W. Wright, Chicago, 1942, p. 56. [56•2] The World War in Figures, Moscow, 1934, p. 28 (in Russian). [58•1] V. I. Lenin, Collected Works, Vol. 24, p. 309. [58•2] Ibid., Vol. 27, p. 76. [58•3] Ibid., Vol. 30, p. 74. [58•4] Militarism. Disarmament, p. 16,

[59•1] Ibid., p. 15. [63•1] M. Slade Kendrick, A Century and a Half of Federal Expenditures, New York, 1955, pp. 95–97. [64•1] Henry E. Eccles, Logistics in the National Defense, Harrisburg, Pennsylvania, 1959, p. 7. 2. THE ECONOMIC AND MILITARY-ECONOMIC POTENTIALS

p The economy is the material and technical basis for military work and war. Other things being equal, the higher the economic potential of a country the greater her military power. That is why to assess the military potential of a country and her possibilities for building up and maintaining armed forces the attention should be focused on the scale, development level and structure of its material production and the existing objective prerequisites for expanding economic activity in a war emergency. p Soviet publications on military and economic subjects contain definitions of “economic” and "military-economic potentials”. A country’s economic potential is her biggest possible output of goods with the existing productive forces and mode of production. p Theoretically, the economic possibilities of a country are limited by the size and quality of such basic elements of productive forces as manpower reserves, natural fuel and raw material resources, available fertile land, the quality 67 and quantity of means of production, the level of scientific and technological development, the efficiency of economic management, etc. Out of the whole body of statistical data furnished by bourgeois economists the most suitable index for estimating the economic potential of capitalist countries is the gross national product (GNP) expressed in market prices as the total of goods and services produced in a year. However, the GNP is but an approximate index of economic potential. First, calculated by methods adopted in bourgeois economic science, it contains a good deal of repeated counting owing, among other things, to the inclusion of the services. Second, it is not concerned with idle capacity, manpower reserves and existing national wealth, which may contribute substantially to a production increase whenever necessary. Third, it does not show the economic possibility to meet specific demands in definite terms of output. Table 10 GNP of Main Capitalist Countries Constant (1970) dollars GNP (thous. dollars) mil. Per capita (dollars GNP 1950 1960 1970 1950 1960 1971) USA ........... 487.2 668.3 993.3 3,200 3,700 4,850 FRG ........... 55.8 117.1 186.2 1,120 2,110 3,020 Japan .......... 31.0 69.2 197.8 370 740 1,910 France .......... 54.6 84.3 148.2 1,310 1,840 2,920 Great Britain ....... 72.1 91.7 119.9 1,430 1,750 2,150 Italy ........... 30.9 53.5 92.9 660 1,080

1,700 Canada .......... 31.8 46.6 76.1 2,320 2,600 3,550 Australia ......... 14.6 21.7 36.2 1,790 2,110 2,880 Sweden .......... 14.2 19.6 30.8 2,020 2,620 3,820 Netherlands ....... 11.8 19.0 31.3 1,160 1,650 2,400 Belgium ......... 11.6 16.1 25.9 1,350 1,750 2,670 Switzerland ...... 8.4 13.2 20.4 1,800 2,450 3,260 Denmark ......... 7.3 10.0 15.7 1,690 2,190 3,200 Austria . . ..... 5.2 9.0 14.4 760 1,280 1,940 Norway . . .... 4.3 -*7 0 11.2 1,310 1,950 2,900 p Source: World Economy and International Relations, March 1972, p. 150 (in Russian). 68 p The GNP can also be used as the basis for comparing the economic potentials of different countries and their possibilities for military work. For this purpose, the GNP values of the countries involved estimated in national currency must be expressed in one monetary unit, for instance, in the US dollar on the basis of its official rate of exchange. p Table 10 shows the great superiority of the United States over other capitalist countries both in terms of output and in terms of GNP per head of population. However, this simple method of comparison fails to produce a true picture of the correlation of the GNPs of the countries involved. The point is that the rate of exchange does not correspond as a rule to the average purchasing power of currencies on the home market. Besides, the rate of exchange indicates the relative purchasing power of currencies only in respect of goods and services handled in international trade. As a result calculation of the GNP according to the official rate of exchange misrepresents the actual correlation of the production indices of the countries involved. p To get a better estimate of the GNPs of different countries in one currency the physical volume of goods and services as part of the national product of each country is calculated in prices of one of the countries involved. [68•1 p Today, the military-economic potential of a country is largely determined by her industrial potential. This being so, the military-economic potentials of different states can also be estimated from their total industrial output. In 1948, the US share in the total industrial output of the capitalist world was 55.8 per cent. However, the post-war rehabilitation and development of the industries of the West European capitalist countries and Japan was accompanied by a decrease in the US share which stood at 40.9 per cent in 1970, i.e., not far above the pre-war level. [68•2 We believe that the US industrial potential is somewhat larger than suggested by the data on its share in the total industrial output of the capitalist world. They relate to the actual annual output of general industrial 69 goods and fail to reflect a number of important indices. In assessing and comparing the military-economic potentials of individual countries account has to be taken of the following factors: p 1. Idle capacity and unemployment the level of which in the United States is higher than in other capitalist countries. In a war emergency the United States has greater possibilities for expanding output by using idle capacity and redundant manpower.

p 2. The size of national wealth and available stocks of raw materials and stores. In this respect, too, the United States has a relative advantage for expanding production over other capitalist countries. p 3. The availability of resources of raw materials. The USA is much better supplied with almost all types of raw materials with US monopolies controlling also the rich natural resources of Canada and Latin America. p 4. The existence of an efficient military industry. For the development and absolute size of military production the United States is far and away ahead of the other imperialist powers. The US share in total military production (nuclear weapons, missiles, aircraft, radioelectronic equipment, etc.) is notably larger than it is in the total industrial output of the capitalist countries. For instance, the share of the US aerospace industry in the total missile and aircraft production of the capitalist world is over eighty per cent. p 5. Foreign investments, gold and foreign exchange reserves that can be used in an emergency to finance the expansion of production and the import of raw materials and endproducts and for other purposes. p 6. Scientific and technological superiority of the United States over the other capitalist states. p 7. The USA, although it is no longer out of reach for war, still has the geographical advantage of protection by the oceans over the West European capitalist countries. p These factors suggest that the economic and the militaryeconomic potential of the USA is somewhat greater in comparison with its share in the total industrial output of the capitalist world. p In comparing the economic and military-economic potentials of different countries, one has to bear in mind that 70 today they are largely determined by the advancement of science and engineering. In the past two or three decades, the importance of science and its use in production have grown immeasurably. The scientific and technological revolution has invaded every sphere of human endeavour, stimulating the rising productivity of social labour, creating objective prerequisites for the rapid development of productive forces and for a substantial increase on this basis of the economic potential of states. This leads to an expansion of their military-economic potential, i.e., to an expansion of the material and technical basis for the armed forces, to a greater possibility of using material and manpower resources for military purposes. In these circumstances, the absolute size of material resources consumed in military work can be increased with their relative share in the gross national product remaining the same or diminishing. For instance, in 1967/68 the US direct military expenditures (by the Defence Department, AEG, NASA), involved in stockpiling strategic materials and providing military aid to other countries, amounted to 85,200 million dollars, or 10.7 per cent of the GNP (1967), whereas in 1952/53, during the US war in Korea, they had reached their peak at 50,500 million dollars, i.e., at 15 per cent of the GNP. [70•1 So, an increase in the economic

potential owing largely to scientific and technological progress enabled the USA to wage its war of aggression in Vietnam spending more in absolute terms and less in relative terms than it did during the Korean war. p The impact of scientific and technological progress on military potential is seen not only in the increased supplies of materiel to the armed forces but also in its far better quality, a highly important factor. The military uses of scientific and technological achievements have produced a revolution in military technology: fundamentally new weapons systems have been developed with characteristics by far superior to those of armaments used at the end of the last world war. The advent and rapid advancement of nuclear weapons, missiles and other types of modern armaments, the widespread use of electronics and cybernetics in the military field 71 combine to increase the destructive capacity of the armed forces at a much faster rate than the growth rates of the country’s economic potential as a whole. p Science contributes to military potential primarily by further improving the means of warfare. Today’s spectacular progress of science and engineering makes it possible to develop new, more destructive weapons systems. The United States is widely using these possibilities to achieve its ambitious military and political goals. It systematically channels enormous funds into military research and development, a process accompanied by the advancement and rapid development of new means of warfare, as well as by the growing contribution of science and engineering to its military power. p Advanced science and engineering as well as enormous material and manpower resources are needed to equip armed forces with sophisticated weapons systems. Science is increasingly becoming a direct productive force manufacturing means of warfare. Without a modern scientific and technological foundation a country cannot organise the production of nuclear weapons, delivery systems and other sophisticated weapons and related equipment. p The USA regards its scientific and technological superiority over the other capitalist countries as a basic condition for retaining its position of leadership in the capitalist world. Therefore, the US ruling quarters use the country’s enormous economic resources to channel into R&D work far greater funds in absolute and relative proportions than those invested by other capitalist countries. Between 1949 and 1963, the main capitalist countries spent a total of 229,000 million dollars on R&D, of which the US share was 147,000 million dollars (over 64 per cent). So, the US share in R&D is far greater than it is in the total industrial output of the capitalist world. In recent years, the USA has been spending on R&D some four per cent of its annual national income, the FRG and France, only two per cent. In per capita terms, the USA spends four times as much on science as France and the FRG. Up to 14–15 per cent of the federal budget appropriations goes into R&D (0.8 per cent in 1939/40), as compared with about 5 per cent in Britain, the FRG and France. 72

p The USA is ahead of the other capitalist countries for the share of government spending on R&D as well. According to some estimates, in 1962, it had 4,200,000 research scientists, engineers and technicians in R&D jobs (its total population was 187,000,000 at the time), while the figure for Britain, the FRG, France and the Netherlands taken together was only 520,000 (their combined population was 175,000,000). p In the USA, R&D work has become a specialised field of business conducted on a wider scale than anywhere else in the capitalist world. This superiority is the most striking in the military field, in military technology in particular. Since in the USA science is geared to military needs much more than in the other capitalist countries, the absolute and relative size of its military spending is greater in comparison with its share in the general expenditures on R&D. p By the end of the last century, the USA had moved ahead of Europe in production management and technology. Yet until the Second World War it lagged behind in applied and basic research. Aware of the steadily growing role of science and engineering in the military field and in economic development and seeking to end its dependence on Europe in basic research, since the Second World War the USA has been systematically spending enormous funds on R&D work and developed first-class technological facilities for experimental research and the advancement of science in general. p R&D work on a vast scale requires a large body of research scientists, engineers and technicians. The number of specialists trained in the USA falls short of the growing demand. According to estimates, this shortage will make itself felt for quite some time. In this situation, the United States is going out of its way to encourage the immigration of foreign scientists. p As far back as the thirties, dozens of leading scientists, Albert Einstein among them, fled nazi Germany and settled in the United States. During World War II scientists from Britain and other countries shared in the work on the Manhattan Project to develop the atom bomb. In that period however the USA employed a relatively small number of foreign specialists. The immigration of specialists from other 73 countries assumed massive proportions after the Second World War when the USA organised a veritable "brain drain" from its partners. According to Professor R. M. Titmuss of Britain, between 1949 and 1966 one hundred thousand scientists, engineers and medical specialists emigrated to the United States. As it costs an average of 40,000 dollars to train one research scientist in the United States, this "brain drain" saved it some 4,000 million dollars over the period, to say nothing of the enormous advantages baffling evaluation the United States derives from the employment of foreign specialists. They settle in the USA for the following basic reasons: first, much higher pay; second, excellent research facilities; third, the far wider range of R&D, and, finally, the easy immigration formalities the US Administration offers skilled specialists. The brain drain is causing great damage to countries they leave. p The USA receives additional profits and “brainpower” by placing R&D contracts, particularly military ones, with research centres abroad. It has been estimated that during

the 1967 calendar year about 0.5 per cent of all DOD R&D contracts was placed with foreign contractors. [73•1 p The brain drain and the use of foreign research centres for carrying out its R&D programmes help the USA retain its scientific, technological, military and economic superiority over other capitalist countries. p Although the GNP and the volume of industrial output can be taken as criteria for assessing and comparing the economic potentials of different countries, they fail to indicate what share can be used for arms production and the maintenance of military equipment and personnel in combat readiness. p Before it can set aside part of its economic and manpower resources for military purposes, a country must satisfy its civilian needs if only the basic ones. The latter change along with economic development and have distinctive national features varying with country’s history and traditions. For these reasons, basic civilian consumption varies from country to country and from period to period. p The economic and military-economic potentials of 74 capitalist countries can be assessed with adequate precision by using a model of a hypothetical wartime economy based on an inter-sectoral production and manpower balance sheet. p The difference between a country’s economic potential and basic civilian demand for goods and services represents her military-economic potential. So her military-economic potential is the biggest share of her economic potential available for military purposes. p The absolute and relative volume of economic work for military purposes varies primarily with the volume of GNP and per capita output. Naturally, of countries with equal absolute GNP volumes (leaving aside production structure and the physical composition of GNP) and other relevant conditions, one with a higher per capita output can allocate more material resources for war. p In fact, a country’s military-economic potential is, as a rule, slightly larger than the share of economic potential actually used by her armed forces, even in time of greatest military and economic effort. In each particular case, the actual utilisation of militaryeconomic potential, i.e., its conversion into real military-economic and military power, is determined by such factors as whether or not the country is at war, the nature and intensity of the war, government policy and military strategy, the socio-economic system, state management, etc. p In peacetime, the USA uses only a part of its military– economic potential for military purposes. In recent years, an average of eight to ten per cent of its GNP has been spent directly on military work. p The US ruling quarters attach exceptional importance to the choice of strategy in preparing the economy for war. Leading university scientists and numerous specialists

and advisers of government and private organisations are involved in work on this problem. In their analyses of military and economic aspects of nuclear-missile warfare American experts seek to evolve along scientific lines the most efficient methods of using the country’s economic potential for military work and of preparing her economy for war. p Advocating full military preparedness and the use for military purposes of a large share of the country’s economic resources already in peacetime, i.e., justifying the arms race 75 theoretically, American military and economic experts attach great importance to the study, quantitative evaluation and comparison of the economic and military-economic potentials of major powers. p Since the early sixties qualitative changes have been in evidence in US studies of military-economic problems. Traditionally, they deal with the economic war potential, conversion of industry, regulation of the economy in time of war and comparison of the economic war potentials of different countries. Such studies are carried on. What is more, their scope has widened. In recent years, the scope of studies of military-economic problems has expanded to include the economic aspect of military work, specifically the organisation and direction of armed forces and military industry enterprises; economic analyses to find an optimum solution to problems involved in estimating the demand for armed forces, military research and choice of weapons systems, logistical support of the armed forces, distribution of funds among individual arms and services, deployment of forces at home and abroad, etc. p Thus, before World War II military-economic theory dealt only with problems involved in sizing up and mobilising military-economic potential, whereas today it is directly concerned with the economic aspects of military work, i.e., the ways and means of converting this potential into real military power. One of the key problems facing military– economic theory, however, is to suggest the most effective use of military resources. The US Administration gives close attention to the training of leading military and civilian executives handling equipment supplies to the armed forces. The absence of centralised economic planning under capitalism creates additional difficulties for military mobilisation of economic resources and demands great government efforts to organise it, with special emphasis on finance. *** Notes [68•1] This method has been evolved by Milton Gilbert and Irving B. Kravis in their study, An International Comparison of National Products and the Purchasing Power of Currencies, Paris, 1958. [68•2] World Economy and International Relations No. 8, 1971, Supplement, p. 14 (in Russian).

[70•1] Calculated according to: The Budget of the United States Government, Fiscal Year 1970, pp. 69, 73; Survey of Current Business, February 1969, p. S-l. [73•1] Industrial Research No. 1, 1967, p. 57.

3. MILITARY FINANCE

p Military-economic potential supplies the bulk of military resources, and methods for converting them into real military power change with historical progress. Slave-owning and feudal societies based on natural economy procured a large 76 share of their military resources by direct exaction: tax in kind, services, etc. As money developed into the basic medium of commodity exchange, however, it was increasingly used by governments, even in the feudal period, for the maintenance and armament of armies. Under capitalism, which is based on commodity production, money has become the exclusive legal tender in government procurement of military and civilian goods and services. p Government revenue is mobilised mostly through the financial system of national income reapportionment. Capitalist finance is a powerful lever with which militaryeconomic potential is turned into real military power and the economy is geared to war. There are conflicting views on its role in military work, its impact on the course and outcome of wars. This role was long considered decisive. As far back as the Renaissance, the Florentine statesman Niccolo Machiavelli wrote: "He wins the war who has an extra thaler in his pocket.” He is credited also with this pictorial metaphor: "Money is the sinew of war.” Statesmen of various countries and periods held similar views. The Russian tsar Peter I decreed: "Money shall be collected without fail as it is the artery of war.” The 17th-century Austrian general Raimund Montecuccoli would say: "Three things are necessary to win a war: first, money; second, more money; third, still more money.” p The view of finance as the crucial factor of war prevailed in bourgeois publications on economic and military subjects for centuries. Bourgeois statesmen and ideologists gave close attention to military finance and accumulation of war emergency funds in peacetime. Before World War I, the finance of military work was studied with particular zeal in Germany. Many leading German economists (Wagner, Riesser, Zann, and others) were involved in comparative studies of the financial power of prospective belligerents. p Before World War I and in its early period, the duration of a war was commonly believed to be limited by pecuniary resources. For example, in 1915 the British Chancellor of the Exchequer McKenna, the well-known British economist John Keynes and others supposed that financial difficulties created by the war might limit and even terminate the hostilities. The former British Prime Minister Lloyd George, 77 commenting in his memoirs on Keynes’ pessimistic view of Britain’s financial possibilities for a sustained war effort, wrote that in the Prime Minister’s opinion, "we

would get through to the end of the financial year, i.e., the 31st of March, 1916, provided our liabilities were not increased by fresh orders... but after that, the Deluge—unless peace intervenes.” [77•1 Lloyd George himself shared this view at the time, as evidenced by his statement that the last milliard would win the war and herald peace. p The financial experience of World War I disproved the theory of finance as the decisive factor in the progress and outcome of a war, and demonstrated that in the era of imperialism funds stored up in peacetime had lost their former importance and had a minor role to play in supplying the immensely increased war demand. In the meantime, the war revealed ,the ability of the belligerent powers to mobilise through finance enormous funds for a sustained war effort. p This experience bred a new theory opposed to the former. The concept of finance as a merely technical means of mobilising material resources and having no essential bearing on the war effort, and the view that financial problems can be solved as a matter of routine became widely current in bourgeois writings on military-economic affairs. p Both theories, evolved in different historical situations and conditioned by a definite level of development of the economy and financial system, reflect the outward aspects of capitalist finance. p Before the advent of imperialism, the relatively small war demand was largely satisfied with material and pecuniary resources laid up in peacetime. Material resources for war, the bulk of which consisted of provisions, apparel and fodder, were easily available for money, so that it was unnecessary to switch the entire economy to war production. This led to exaggeration of the role of money in war and the wrong view of money having the decisive effect on its course and outcome. p Under imperialism the situation changed radically. Spectacular advances in military technology and much greater 78 military demand for material resources pointed to material production as the main factor in war. At the same time, concentration of industries and increasingly centralised management, the development of transportation services, the closer links between government and industry, the growth of statemonopoly capitalism and, lastly, the emergence of a ramified financial and credit system enabled the government quickly to mobilise requisite funds in wartime, gearing that entire system to military work and war. This led to another delusion, namely, the view of finance playing a merely technical role in war. p Both these theories are untenable, failing to show the true role of finance in war. The Marxist-Leninist theory of finance, however, clearly shows its place in the relationship between war and the economy. Finance cannot be lumped together with manpower resources, production capacities, raw materials and fuel reserves, etc., which make up economic potential. It is a derivative of production directly related to its volume and level of development. Nor is it a passive factor in relation to the economy, being actively involved in social reproduction. Financial policy, the use of financial levers by state-

monopoly capitalism have a direct bearing on production, stimulating or hampering its development as the case may be, i.e., increasing or reducing the economic potential. p The government uses finance as a lever with which to mobilise and use the militaryeconomic potential. It is precisely from this aspect that we shall view finance as an indispensable element of military work and war. p The following functions of finance express its role as a tool by which militaryeconomic potential is converted to real military power. p 1. Under capitalism, where means of production and hence its fruits are owned by private employers, and government ownership is unimportant, money is the sole legal tender in government procurement of goods and services and in military pay. Small wonder, therefore, that a capitalist state needs a lot of money for military work and war. p This money is drawn from the gross national product and national income. Capitalist governments collect money by redistributing primary income (profit, ground rent, wages 79 and salaries) through the financial system by means of taxation, loans, emission of paper money, and otherwise. Leaning on its political power, the government uses the above methods to appropriate a share of primary income. Methods for mobilising funds determine the distribution of costs involved in military work and war between the different classes. The bulk of the expense of military work is shouldered by the working classes. As military technology develops and wars grow in scale and intensity, the share of national income the government spends for military work grows, too. This in turn results in a greater financial exploitation of the working masses. p When mobilising funds the government runs into difficulties, the main of which are resistance of the masses to their intensified financial exploitation and the latter’s adverse effect on the nation’s economic welfare. These difficulties grow worse in wartime, when new sources of revenue have to be found to meet the colossal military disbursements. Nevertheless, as the experience of the two world wars indicates, capitalist governments, resorting to various, techniques, manage to store up huge funds for military work, largely because in wartime the economy becomes lop-sided, public capital circulates faster, and monetary capital grows more quickly than real capital. When a government mobilises the bulk of material resources for unproductive purposes (in 1943, the USA spent roughly two-thirds of its industrial output for war), the growing income of the capitalists and other population groups cannot be fully expended, as a rule, due to the rationing of many civilian goods. What is more, by taking various state-monopoly measures the government regulates the economy in the interests of war, limits private civilian construction, replacement of plant and equipment, etc. This results in accumulation of free capital seeking investment. In wartime, it does not reflect accumulation of real capital, and is the product of a specific war market situation available even with a dislocated economy. Hence the ability of belligerent powers to mobilise enormous funds for a sustained war effort.

p The military market situation helps accumulate free capital to be used for war by operating the flexible levers of military finance. The same situation, however, the inflationary methods of war finance in particular, leads to a rise in 80 commodity prices and inflation, reducing the efficiency of military spending, as governments have to spend more to get the same, and to the growing danger of economic dislocation with all its disastrous consequences. This makes it clear that the government’s possibilities for capital accumulation are limited, that finance is not a merely technical means of war but an important lever for converting existing military-economic potential to real military power with the degree of efficiency varying with the skill of handling military finance. An inefficient financial and credit system and wrong techniques of military finance may lead to government failures in using objective material possibilities for military work, of essential importance for the course and outcome of a war. p We have discussed above the limits of military finance in wars demanding tremendous efforts from the belligerents. Needless to say, in other situations the use of military finance on a comparable scale is unthinkable. p 2. The government spends accumulated funds to meet various military expenses, i.e., to finance specific militaryeconomic measures. p Military work and war demand numerous types of spending, mostly for personnel and equipment supply and maintenance, research and development, construction, etc. p The volume of military spending a nation can afford varies with its military-economic potential. Appropriations for individual types of military work are dictated by the advancement of military technology, the character and objectives of this work. All these are factors shaping a nation’s military strategy. p 3. Finance is an important lever of organising, maintaining and developing military production in peacetime and of gearing the entire economy to military work in wartime. The attainment of these objectives is largely facilitated by the government’s direct regulation of the economy through legislation and administrative orders, prohibiting, for example, the production of many civilian goods (during World War II, the manufacture of cars for civilian uses, household refrigerators, electric appliances, trading equipment, office machines and many other goods was banned in the USA and Britain). The use of indirect, in particular, financial 81 levers is not less important in conditions of the capitalist economy. p Alleging that in wartime profit loses its importance and that satisfaction of public needs becomes the main stimulus of economic activity, bourgeois ideologists seek to prove that a capitalist wartime economy is amenable to public control. Experience shows that such claims are unfounded and the main laws of capitalist production continue to operate in wartime despite the much widened sphere of state-monopoly capitalism and government regulation of industry. The capitalists organise war production not so much out of “patriotic” sentiments, which they may well have, as from their craving for profits and wealth. Of course, when the system of government and capitalist wealth are at stake they

agree to “sacrifice” their interests temporarily to save the system as a whole. In wartime individual monopolies have sometimes to subordinate their private interests to the common class interests of all capitalists so as to get a compensation and multiply their wealth after the war. p In wartime, in addition to legislative, administrative and political measures, the government has to make wide use of financial levers to ease adaptation of the economy to largescale war production at a high rate of monopoly profit. It grants subsidies and tax reliefs to private military industries, awards military contracts on favourable terms, gives them advance payments and low-interest credits, supplies them with scarce equipment and raw materials on a priority basis, etc. p Since in wartime, the bulk of national income is collected and spent through the budget, the government has much greater possibilities to regulate the economy through finance. With its enormous pecuniary resources and control over the overwhelming share of solvent demand, the government is able to regulate the economy, using in addition such important state-monopoly measures as prices and wages control, distribution of manpower, raw materials and scarce materials, government capital investments, etc. By setting prices on military and civilian goods the government secures their increased or curtailed production to keep pace with the war demand. It also provides for relatively higher earnings in the military industries to secure an inflow of manpower from 82 civilian industries. Among the many methods of state– monopoly regulation of the military economy government capital investments and the privilege of accelerated amortisation of private capital outlays granted to the monopolies deserve special mention. All these financial measures stimulate larger military production and adaptation of the economy to the needs of war. p In view of the growing relationship between war and the economy the role of finance in organising and stimulating war production becomes particularly great in the conditions of unplanned capitalist management. Today, the USA is widely using finance to prepare the economy for a war emergency, develop military technology, carry out various mobilisation measures to harness the economy to war within a brief space of time. p 4. Finance, military finance in particular, is of great importance also for securing rational military spending. In the post-war period, finance and the efficiency of military spending have riveted the attention of American authors on military-economic subjects. It is emphasised in publications dealing with the economic aspects of military work that in view of the extremely increased military demand for material resources even a wealthy country like the USA is unable to meet it in full. Professor Bernard Brodie of the USA writes in Strategy in the Missile Age: p “We do not have and probably never will have enough money to buy all the things we could effectively use for our defense. The choices we have to make would be difficult and painful even if our military budget were twice what it is today. The fact that we are dealing with a lesser sum only makes the choices harder and painful.” [82•1

p In view of the immenseness of military demand and the definite size of authorised military spending, the US Ad" ministration pays close attention to raising its efficiency. Since 1961, the Pentagon has taken effective steps to improve the system of military demand evaluation, methods used to draft the military budget and control its fulfilment. p 5. Military finance is also used for military purposes 83 in dealing with world problems. Throughout its history the USA has been widely using graft and financial “aid” to attain its imperialist objectives. These methods have been used particularly often in the post-war years, when the socalled foreign aid has become an organic component of US policy. p To seize and use enemy resources military currency is issued in occupied territory in wartime. For example, during World War II the USA issued military payment certificates in some North African countries, in Sicily, Southern Italy, Greece, etc. The above-listed basic functions of finance in the broad range of military activities determine its contribution to military potential. Finance, of course, does not decide the course and outcome of wars nor is it a merely technical means of war. As military demand for material resources grows and the selection of an optimum variant in military spending becomes more and more difficult, the financial mechanism of military work and war becomes more intricate and the role of finance in military potential greater, since finance is increasingly turning into a major factor of efficient military-economic work. *** Notes [77•1] War Memoirs of David Lloyd George, Vol. II, London, 1933, pp. 682–83. [82•1] Bernard Brodie, Strategy in the Missile Age, Princeton, New Jersey, 1959, pp. 359–60.

CHAPTER III BASIC PRINCIPLES OF FINANCING US MILITARY-ECONOMIC ACTIVITIES 1. GENERAL MANAGEMENT OF ARMED FORCES DEVELOPMENT

p The US armed forces are organised and developed in accordance with the US official military doctrine. The National Security Council (NSC) advises the President about military policy. Under the Constitution, the President is the Commander-in-Chief of the Armed Forces and is responsible for military policy planning and implementation. The NSC is composed of the President (Chairman), the Vice President, the Secretary of State, the Secretary of Defence and the Director of the Office of Emergency Preparedness. The Nixon Administration has taken steps to enhance the role of the National Security Council. The Council issues an annual report on basic policy in national security affairs for the guidance of all government agencies dealing with military matters. On the basis of this report the Joint Chiefs of Staff draw up the Joint Strategic Objectives Plan containing an evaluation of armed forces requirements in the next five to eight years in accordance with the approved military strategy. p The imperialist policy "from positions of strength" is expressed in the US military strategy. Approximately until late 1960, it was officially known as the "massive retaliation" strategy, in accordance with which the USA was to use nuclear weapons in the event of any military conflict with the USSR. This strategy was based on the assumption that the USA allegedly had an overwhelming superiority over the Soviet Union in nuclear striking power, especially in strategic bombers. Therefore, the advocates of this strategy reasoned, US political and military objectives could be 85 achieved only by threatening an all-out nuclear war the socialist countries would not dare to risk, aware of their inferior offensive nuclear capability. p Adhering to this strategy, the USA concentrated on nuclear weapons development. The bulk of the budget military appropriations went to the nuclear forces at the expense of the conventional ones. This, as well as the absence of a uniform strategy for all arms and services, led to a disproportion in the development of the armed services and caused considerable financial waste.

p In the late fifties this strategy came under sharp criticism from the Americans themselves. For instance, Maxwell Taylor in The Uncertain Trumpet showed the untenability of the massive retaliation strategy, in particular of its basic assumption about the alleged US superiority in strategic nuclear forces. The view was gaining ground in the United States at the time of the need to develop a new strategy which would be more in tune with the US global plans. The Kennedy Administration revised the strategic concept of "massive nuclear retaliation" in favour of the "flexible response" strategy the essence of which was spelled out in sufficient detail in President Kennedy’s messages to Congress of March 28 and May 25, 1961, and in his TV address on July 25, 1961. p The flexible response strategy, which has underlain the US armed forces development since 1961, has markedly influenced the size and distribution of military appropriations. A large share of the rapidly growing military outlays goes to build up the nuclear missile forces. At the same time, the US militarists display revived interest in conventional armaments to comply with the above changes in military strategy. The Pentagon generals formerly pinned their hopes on thermonuclear weapons whereas today they think that nuclear forces alone cannot achieve their objectives, and are stepping up the production of conventional armaments. p The flexible response strategy provided for the development of the better balanced armed services. In the sixties, the US armed forces substantially increased their power and mobility due to the Defence Department’s efforts to supply them with more transport facilities, including planes and ships. 86 p The activities of the Republican Administration and President Nixon’s foreign policy messages indicate that the strategic line of US imperialism directed against socialism, national liberation and revolutionary movements remains unchanged as does its reliance on the active use of military force as a direct tool of its reactionary policy. At the same time, the Nixon Administration has introduced major alterations into the US foreign policy as manifested by the "Nixon Doctrine”. In the light of this doctrine the "flexible response" strategy has been revised in favour of "realistic containment" strategy. The official adoption of the new military strategy is attended with certain amendments in the basic concepts of the US armed forces development policy, in particular, a trend has been in evidence towards a reduction in the conventional forces and renewed emphasis on nuclear deterrent forces.

2. THE SYSTEM OF ESTIMATING MILITARY DEMAND AND DRAFTING THE MILITARY BUDGET

p Every year the USA spends huge sums for military purposes. The size and structure of military appropriations are determined by a great variety of factors, the chief of which is military strategy. The impact of strategy on the scale and shares of individual types of military work makes itself felt through the military budget. Budgetary funds are allocated in a way that adequately provides for the fulfilment of the armed forces development programmes. p The revolution in military technology that has taken place over the past thirty years, as well as its continued rapid progress, calls for methods other than those used before World War II for planning the military strategy and the design of the armed forces, for choosing weapons systems and finding the optimum variants of allocating and utilising military appropriations. In the past, when military technology changed relatively slowly, the experience of military and political leaders was the basis for the practical solution of military problems. The armed forces development programmes were based on the existing level of military technology with little or no thought given to possible 87 changes. Today, when science and engineering are developing rapidly the picture has changed radically. Now that there is a great variety of weapons systems while resources that can be used for military purposes are limited, the choice of a weapons system assumes great importance from the standpoint of military power and the most judicious expenditure of military appropriations. p In the late fifties, US experts on economic war problems, high-ranking government officials and political leaders became increasingly critical of the existing system of planning and financing the US armed forces development. It was pointed out that the system had serious drawbacks and was out of tune with the state of military art and tended to reduce the effectiveness of US military-economic activities. p To improve the effectiveness of military expenditures the Administration introduced in the early fifties substantial changes in its methods of guidance of the Defence Department. The Administration instructed a group of economists to work out a system of methods of economic analysis for use in the practical solution of military problems. The Defence Department initiated a variety of economic studies to compare the

efficiency of different ways of achieving war objectives and to identify a variant ensuring maximum results on a given outlay or the actual result on a minimum outlay. To choose the optimum variant of solving a military problem a comparison is made of the total expenditure on a programme and the effectiveness of this programme from the standpoint of the objectives facing the armed forces. Cost-effectiveness comparisons prompted the Defence Department to discontinue the development of many weapons systems which were in the R&D stage. p In 1961 the Defence Department adopted a new system of military planning and financing known as planning– programming-budgeting (PPB). Under this new system, military decisions are taken not for individual armed services, as was the old practice, but according to the principle of dividing the overall national defence objectives into "program elements" and "program packages”. This division is the dominant feature of PPB. According to Pentagon parlance a "program element" stands for integrated specific units of 88 closely interlocking types of military power or other military activity. Program elements include, for instance, B-52 bomber wings, infantry battalions, warships, etc. Their equipment, armament, personnel, supply and other types of support necessary to make them an efficient combat force are considered in their totality. US military planning covers over a thousand of program elements. A special form is filled for each of these programmes, giving summarised data on related points. p A "program package" groups together program elements relating to different arms and services but having common strategic and tactical objectives and functions. Examples include squadrons of Minuteman and Titan ICBMs, Polariscarrying nuclear-powered submarines, strategic B-52 and B-58 wings, army anti-aircraft missile battalions and other strategic forces thrown together in a single program package called "strategic forces”. p The US armed forces comprise the following program packages: strategic forces, general purpose forces, intelligence and communications, airlift and sealift, guard and reserve, R&D, central supply and maintenance, training, medical and other general personnel activities, administration and associated activities, support of other nations. p The five-year programme of military work based on PPB is not a substitute for the armed forces development planning and budgeting, since it is only a link connecting these two processes into one system composed of the following three organically integrated and successive stages: long-term military planning, programming and the drafting of the Defence Department annual budget. The point of departure for annual adjustment, updating and extension of armed forces development programmes and budget drafting is the standing five-year planning and financing programme for the US armed forces. p The adoption of the PPB system marked the end of the old practice whereby prior to drafting a new budget for next year the President authorised in advance the limit for total military appropriations, and the Secretary of Defence distributed the total among the armed services, which in turn were to make their own plans on the basis of the funds

allotted to them. The five-year armed forces development and 89 financing programme was the basis on which the military budget was drafted. The programme was drawn up in such a way as to permit the grouping together of data under traditional budgetary headings (military personnel, operation and maintenance, procurement, etc.) and the drafting of the Defence Department’s annual budget for next year. Allocations for each programme were classified according to the relevant article of the budget. p PPB left intact the old official procedure of drafting and approving the military budget. This traditional procedure is considered convenient for discussion and approval of the budget in Congress and also for controlling budget fulfilment. The draft budget for the next fiscal year is presented to the Office of Management and Budget, which analyses and incorporates it in the federal budget. In January the latter is submitted to Congress for discussion and approval as the President’s budget message. p The adoption of PPB led to qualitative changes in the methods of administering the Defence Department. It resulted in greater centralisation in military decision-making and attempts to give it scientific substantiation. Before 1961 most military problems were solved independently by a corresponding military department, whereas after 1961 basic decisions began to be taken centrally by the Defence Secretary or by his closest aides. To make the most of the advantages offered by centralised management and arrive at the best military decisions it is vital that the decision-makers have adequate and fully reliable information, both statistical and analytical, on the problems under scrutiny. This information is provided by large-scale military-economic research conducted in the USA with a view to ascertaining the efficiency and cost of the military programmes being compared. These estimates are made and correlated by means of what is known as systems analysis. Although it is similar to operations analysis it differs from the latter substantially in that it examines not only the ways and means of using the available forces most efficiently (without analysing their composition, cost and effectiveness) for solving the given problems but also the problems themselves and the possibilities of developing optimal (according to the cost-effectiveness formula) forces needed to cope with them. 90 p Evaluation of the effectiveness of alternative programmes is done by means of modelling, calculated experimentation and correlation. p Effectiveness evaluation is only one aspect of systems analysis. Its another component is identification of the cost of alternative programmes by means of economic analysis. An analysis of the cost of a programme includes evaluation of its full cost, i.e., all the expenditures in all the stages of the programme (research and development, production and operation). Evaluation of the full cost is a must for adopting correct decisions on military programmes.

p After the military efficiency and cost of a programme have been evaluated alternative programmes are compared according to the cost-effectiveness formula, and the optimal ones are selected and approved. p The PPB system has obvious advantages over the system of military planning and budgeting that existed in the United States until 1961. The military budget was drafted and. approved after an assessment of the armed forces requirements under such headings as military personnel, operation and maintenance, procurement, R&D, military construction, etc. This precluded assessment of the overall cost of a programme and its final military effect. p The PPB system makes it possible, within the limits of individual program packages and, consequently, on the whole, to have a more accurate and better substantiated picture of the current and future requirements of the US armed forces (strength, structure and equipment). p A serious drawback of the old system of military planning and budgeting which led to large unwarranted expenditures was incoordination between long-term and short-term planning of armed forces development and the drafting of the annual budget. Under the old system armed forces development plans were drawn up by the Joint Chiefs of Staff for a long period but there was no long-term budgeting programme. The financing of military-economic work was effected by the Office of the Comptroller General exclusively on the basis of the annual budget. p The budget was based on the annual programmes drawn up by the military departments. Before World War II, when military budgets were relatively small, it was comparatively 91 easy to draft the budget. In the post-war period, however, with a considerable increase in military expenditures, the old method of drafting the budget involved great difficulties. Long-term armed forces development plans were often unsubstantiated financially, since the outlays involved exceeded by far as a rule the ceiling of the military budget annually set by the federal government. As a result, the Defence Department had to discard, curtail or slow down many programmes which had already consumed large sums. p The PPB system has eliminated these drawbacks. Now long-term armed forces development planning is closely coordinated from the outset with budget decisions (without revising the traditional methods of managing both) to draw up military programmes backed up with adequate material and financial resources. p In the past, a serious defect in drafting the military budget was priority attention to the budgets of individual military departments drawn up separately within the limits of sums allocated to each. As a result, each of the three armed services developed more or less in isolation, while forces entrusted with general functions and composed of different services were never considered as a whole.

p This incoordination between the budgets of the three armed services resulted, among other things, in stiff competition among them and in duplication of military work. Because of this competition, duplication and the inadequacy of methods for assessing military requirements, as well as the absence of a centralised logistic supply agency (each fighting service had its own), huge stocks of outdated and surplus equipment piled up at military depots. p PPB reduced the autonomy of and competition between individual armed services and made for a more centralised and unified management of military-economic work. p The wide-range military-economic studies at the Pentagon, which employs many civilian advisers, have led to a controversy between military and civilian officials of the Defence Department. Many career officers are disgruntled by what they feel is an intrusion by incompetent civilians on military authority and judgement, as the takeover by the Defence Secretary and his civilian advisers of the traditional functions of the military departments and the Joint Chiefs 92 of Staff. The controversy and discontent among military and civilian officials of the Pentagon became the subject of a debate in Congress. p The critics of the Pentagon’s new procedure for dealing with military problems usually argue against its two aspects: first, overcentralisation of authority, the drastic curtailment of the autonomy of the military departments in weapons development and procurement owing to their functions being increasingly taken over by the Office of the Defence Secretary; second, overemphasis on a scientific approach to military problems and an extensive use of cost-effectiveness studies for military programmes. [92•1 A vivid description of the controversy is provided by Hanson Baldwin in his article "Slow-Down in the Pentagon" carried by the journal Foreign Affairs in January 1965. He writes: "Mr. McNamara’s ‘whizkids’, complete with slide rules and computers, brushed aside the factor of professional judgment or scientific hunch ... and their emphasis upon ’perfection on paper’ and the cost part of the cost-effectiveness formula has definitely slowed the pace of military development.” p Without doubt, the adoption of PPB has improved methods of planning and financing US military development. However, this system cannot eliminate all drawbacks in military work, still less those which stem from the capitalist principles of organising military-economic work. What is more, the PPB system, even in the opinion of those who favour it, has a number of weak points. For instance, the Defence Department budget as part of the federal budget continues to be drawn up on an annual basis, while the planning and programming of armed forces development are conducted on a long-term basis. This tends to complicate somewhat the functioning of the PPB system. p Another drawback of the PPB system is the unavailability of methods for forecasting accurately enough the cost and effectiveness of military programmes, especially those relating to new weapons systems. Military-economic studies provide only a rough estimate of the cost of military programmes being compared. The toughest problem is an accurate evaluation of the military effectiveness of alternative 93 programmes. This is

explained by the absence of a standard criterion of effectiveness and by the multipurpose nature of individual programmes. p For these reasons, cost-effectiveness estimates are far from accurate, which limits their value as the basis for decisions taken by the higher echelons of the Defence Department. p According to American experts, another drawback of the PPB system is overcentralisation of authority in the person of the Defence Secretary, which straight jackets the initiative of the lower echelons and complicates the procedure for amending approved five-year programmes. p The PPB system calls for a good deal of additional analysis, which at times may hinder or delay the solution of military problems. For instance, at one time, the Department of the Navy requested the installation of a nuclear power plant on a newly built aircraft carrier. The request was examined in the Office of the Defence Secretary and turned down as inadequately substantiated. p American writers on military-economic affairs cite examples showing the essential weaknesses of the PPB system and incompetent decisions made by the Democratic Administration. These include the construction of the /. F. Kennedy aircraft carrier with a conventional power plant, the F-101 fighter-bomber development, and the scrapping of the Skybolt missile project. p In 1965 President Johnson ordered the introduction of the PPB system in other departments. p According to the American press the Nixon Administration has introduced essential changes into the system of management of the Defence Department adopted under the ex-Secretary Robert McNamara. Specifically, methods of taking important military decisions within the PPB framework are being revised. p Today, armed forces development planning and programming and military budgeting are based from the beginning of the PPB cycle on strategic and financial guidelines set by the President and the National Security Council. p There has been a reversion to the former practice of setting a tentative expenditure ceiling to programmes and annual budgets drafted by the three military departments 94 as a measure to secure a more realistic and better substantiated budget. A tendency towards decentralisation of authority is in evidence within the US Department of Defence. Formerly, estimation of military requirements, armed forces development planning and financing were initiated by the central agencies of the Department of Defence (the Systems Analysis Board in particular), whereas now the Joint Chiefs of Staff and the three military departments have the decisive role to play in drafting five-year armed forces development programmes and annual budgets. This has taken away a large share of responsibility for making military decisions from some central divisions of the Department of Defence, the Systems Analysis Board in particular. According to the US

press, the Board will henceforth be concerned with analysis and evaluation of long-range military programmes and annual budgets drafted by the three military departments. p Changes in military planning and programming, decisionmaking and budgeting are aimed at improving the management of military-economic work so as to raise the effectiveness of military expenditures, to develop and maintain armed forces best adapted (in strength, structure, equipment, mobility, etc.) to the political and military strategy of US imperialism. Americans themselves admit that the DOD management system still suffers from many serious failings. The current changes in the US system of regulating military-economic activity should be closely studied, because today, the military power of a country is determined not only by her total military expenditures but also by their effectiveness. *** Notes [92•1] Fortune, July 1965, p. 118.

3. MILITARY BUDGET EXECUTION AND MATERIAL SUPPORT OF THE ARMED FORCES

p The military budget approved by Congress and endorsed by the President becomes law. Its execution implies the maintenance of the armed forces and keeping them supplied with goods and services necessary for their normal functioning. Military budget execution is closely bound up with logistics support which supplies the link between the economy and the armed forces. 95 p As the material requirements of the armed forces grow, so does the importance of the logistics support management and the machinery of budget execution. These problems have an increasing bearing on the effectiveness of military work. p To keep the armed forces going many different types of outlay have to be made, which vary in form, time and order of priority with the specifics of military work. For instance, spending on military personnel differs from that on arms procurement, the latter, from spending on military research and development, and so on. p About two-fifths of the total Defence Department spending is the pay to military and civilian personnel of the armed forces. The remaining three-fifths is spent on goods and services provided by private business. The execution of this part of the military budget, i.e., procurement of weapons and ammunition, food and equipment, spending on R&D and other goods and services is crucial for the functioning and combat efficiency of the armed forces. The system of spending for these purposes has a marked impact on the efficiency of military activity. This being so, let us examine in more detail military budget fulfilment as regards the material support of the US armed forces. p They consume an enormous variety of goods which can be divided into the following basic groups: weapons and military equipment; stores and food supplies; fuel and lubricants, and other goods. The bulk of military purchases consists of weapons and military equipment.

p In the pre-monopoly period of capitalism, the relatively small demand of the armed forces for military equipment was met primarily by specialised government arsenals. Already in the First World War and particularly the Second World War, however, the bulk of armaments was manufactured by private companies. The role of government arsenals in meeting the steadily growing military demand continued to decline after World War II as well. Today, over 90 per cent of the total output of weapons and military equipment is produced by private firms which sell them to the government. Since military demand is vast and varied goods procurement and the management of relations between government procurement agencies and private firms have become a complicated business. 96 p Before World War II, military procurement was not centralised. With few exceptions there was no co-ordination between the procurement programmes of the Army [96•1 and the Navy. The technical services of the Army and the procurement agencies of the Navy operated independently on instructions from their command. This incoordination had an adverse effect on military equipment supplies. The military procurement system was sharply criticised during World War I. When the war ended, however, the volume of procurement sharply declined, and demands for radical changes in the military procurement system became less insistent. p World War II revived attention to this problem. In its early stage co-ordination of the procurement programmes was entrusted to the Army-Navy Munitions Board headed by top civilian officials of the armed forces (earlier procurement had been directed by the military). Early in 1942, direction of military procurement programmes was handed over to the War Production Board, an independent civilian body. Actually, however, the latter exercised its wide authority very rarely, having delegated it to the Army-Navy Munitions Board and to individual armed services. When the war was over, the War Production Board was abolished, and its responsibility for procurement co-ordination was vested in the Army-Navy Munitions Board. p The Defence Department set up in 1947 (the Air Force was taken over by an independent military department) began to play an increasingly great role in planning military procurement policy and in co-ordinating individual procurement operations, in standardising specifications, in dividing authority for the procurement of general goods and in organising joint procurement. Special instructions were issued to unify procurement methods. Joint procurement agencies were set up to handle oil products and medical goods supply to all armed services. This slightly improved the procurement system and made it more efficient. p Budget fulfilment, however, still suffered from serious failures partly attributable to the inaccurate estimates of 97 military demand and the budgeting procedure discussed before.

p Independent budgeting for individual armed services presupposed independent budget fulfilment. So the armed services first competed for a greater share of the appropriations, then, when the budget entered the fulfilment stage, for material resources and the right to develop individual types of military equipment. What is more, there was a good deal of rivalry within each of the armed services. For instance, before World War II, advocates of battleships within the Navy vied with champions of naval aviation and aircraft carriers for the lion’s share of the budget appropriations. In the late fifties a similar conflict flared up between champions of missile-carrying submarines and advocates of aircraft carriers. p Until recently, each armed service obtained almost all requisite goods and services through its own procurement agencies. Competition between the armed services, their autonomy, the actual lack of co-ordination and other drawbacks in their logistics support led to a good deal of duplication in procurement, causing great budgetary waste. All this created a situation where private corporations, pulling their strings in the Pentagon, turned military contracts into a source of fabulous profits. p Serious shortcomings in budget execution, in particular in military procurement, have long been discussed in the American press and various legislative and executive bodies. Congress has repeatedly noted these shortcomings and instructed the Defence Department to remedy them. p To raise the effectiveness of military spending and eliminate waste the US Administration has in recent years taken a series of measures to streamline the fulfilment of the military budget and the material supply of the armed forces in addition to improving the procedure for estimating military demand and for budgeting. p As mentioned earlier, the adoption of the PPB system served to increase the centralisation of authority at the Pentagon in planning military development and coordinating different procurement programmes. However, budget fulfilment, i.e., the actual implementation of military programmes, 98 especially in arms procurement, is still decentralised. Top Pentagon officials have pointed out that military activity covers too many fields, problems and territories to be managed from a common centre. p In fact, numerous agencies and a vast number of military and civilian officers are engaged in military procurement and supply of the armed forces on behalf of the federal government. Both the Defence Department as a whole and the three military departments have such agencies. p A study of military procurement reveals two conflicting tendencies. On the one hand, the Pentagon has shown growing determination to centralise procurement, on the other, it has transferred some of its functions to new organisations independent from it. For instance, the AEG and NASA, after their inception, took over corresponding procurement functions from the Defence Department. p Although many different organisations are engaged in military procurement, the federal government is in the final analysis the sole buyer of military hardware. This lends a

specific character to the purchase and sale of military goods on the war market where free competition is absent and prices are not governed by the law of value. p The government procures military goods under contracts with private firms, interfering in the operation of private business to regulate the military economy. These contracts determine not only the scale of military production but also its trends of development and geography. p Co-ordination of relationships between the numerous government procurement agencies and private firms (prime military contractors alone total 7,500) is a vast and complex field of activity. The Defence Department handles some fifteen million purchasing actions annually. [98•1 A great number of people are involved in awarding military contracts and in supervising their performance. For instance, in 1958, some 5,500 military and about 10,000 civilian officers were engaged in procurement. [98•2 Needless to say, their numbers have since grown due to the marked increase in military procurement. 99 p The effectiveness of military spending is dependent in the final analysis on the efficiency of numerous procurement agencies and personnel handling supplies to the armed forces. Therefore, in recent years, the US Administration has introduced important improvements into the management and structure of the Defence Department’s procurement agencies. p In 1961, the functions of the assistants to the Defence Secretary for procurement, installations and logistics were handed over to the Office of Installations and Logistics, a new Pentagon agency in charge of procurement, transportation and supplies for the armed forces as a whole. It has wide powers, spending some two-thirds of the Pentagon’s budgetary appropriations for its purposes. p The Office of Installations and Logistics makes recommendations on policy-making, planning and programming within the Defence Department, works out a procedure and standards for the management of approved plans and programmes, examines programmes submitted by individual military departments, assesses the progress in implementing approved programmes and recommends measures to improve the Defence Department’s work, eliminate duplication and raise the level of military preparedness. p The Office of Installations and Logistics co-ordinates procurement and supply operations of the military departments and other agencies of the Defence Department and maintains liaison with organisations outside the latter’s control. In addition, it works out and issues instructions to procurement agencies. p Both centralised procurement agencies and the appropriate bodies of the military departments procure goods under the control of the Office of Installations and Logistics.

p The production of nuclear weapons is the responsibility of the Atomic Energy Commission. The Defence Atomic Support Agency set up at the Defence Department co– ordinates Pentagon and AEC work in nuclear weapons development, testing and stockpiling. The Defence Atomic Support Agency is also called upon to render qualified assistance to the Defence Department and the Joint Chiefs of Staff in the conduct of military work and the combat training of the armed services in the use of nuclear weapons. 100 p In 1961 the Defence Department set up the Defence Supply Agency to control centralised supply to the armed forces of general goods, including their procurement, storage, distribution and transportation, improve logistics support and eliminate overspending on general goods. p The Defence Supply Agency does not procure military equipment (which is still the responsibility of agencies of the military departments) being in charge of supplying the armed forces with apparel, accoutrements, food, fuel and lubricants, medical goods, industrial materials and other general goods. The list of goods supplied by the Agency covers 1,600,000 items and continues to expand. p To centralise and streamline the management of military R&D and procurement, the Defence Department introduced a series of changes in the organisational structure of the armed services’ procurement agencies. Besides, it worked out and adopted a five-year economy programme for 1962–66 to save funds by strict observance of the following principles: to procure only indispensable goods on a minimum outlay and cut operating and administrative costs. Between 1962 and 1966, the Defence Department saved a total of over 14,000 million dollars, in particular, 1,052 million in 1966/67 and 1,042 million in 1967/68, primarily by improving the procedure for evaluating military demand, deleting inessential items from procurement programmes, cutting to a minimum the range of complementary goods, spare parts and accessories, as well as by using surpluses to reduce procurement programmes, eliminating superfluous elements of design and manufacture, standardising and narrowing the range of supply items. p By improving the system of distribution of and settlements under military contracts and tightening up control over their performance, the Defence Department seeks to enhance the responsibility and efficiency oif military contractors and ultimately secure price reductions. p The Pentagon attaches great importance to cutting operating costs. The rapid progress of military technology leads to early obsolescence not only of weapons systems but often of installations and facilities designed for the use and maintenance of weapons and equipment. Thus, the recent switch from manned bombers to strategic missiles has compelled 101 the Defence Department to revise the entire network of military installations with a view to dismantling redundant military bases and facilities. The

Defence Department intends to secure considerable savings by perfecting the operation of its administrative machinery and numerous procurement agencies. p These savings involve no reduction in Congress-approved military expenditure, which would have simply been greater (or the volume of military work, smaller) by a corresponding amount. The American press noted the token nature of these savings and the Pentagon’s efforts to exaggerate their importance. They, however, have been big enough to raise the effectiveness of US military expenditures on the whole. While amending the PPB system, the Nixon Administration is modifying the methods of military budget fulfilment and military procurement, contracts awarding in particular. The measures taken by the US Administration to streamline the management of military development are dictated by the overall strategic objectives*of American imperialism. The overall interests of the US monopolies, however, often conflict with those of the military-industrial complex, which has grown and is waxing fat on huge government contracts. It is a sinister force which exerts appreciable influence on the shaping of US foreign policy and manoeuvres the Defence Department into taking decisions which eventually bring the arms manufacturers still greater profits. In its chase after profits it stops at nothing to make the arms race more intensive. *** Notes [96•1] The Air Force was a part of the Army. [98•1] Congressional Record, July 11, 1968, p. H6415. [98•2] Merton J. Peck, Frederick M. Scherer, The Weapons Acquisition Process: An Economic Analysis, Boston, 1962, pp. 85–86.

CHAPTER IV THE STRUCTURE AND GENERAL CHARACTERISTICS OF DIRECT MILITARY EXPENDITURE [introduction.]

p Direct military expenditures, as mentioned earlier, are government outlays for maintaining and increasing a country’s military power and military-economic potential in time of peace and for military operations in time of war. Direct military expenditures may be divided into two groups according to their functional purpose: one for maintaining existing military power, the other, for augmenting that power. p The first varies in size with the strength of the armed forces, the conditions and nature of their activity: flying time quotas for Air Force personnel, repair time for various types of military equipment, the frequency of exercises and manoeuvres and the troop strength and amount of military equipment involved. The second is largely contingent on military policy and the aims of military activity. At the same time, expenditure for augmenting existing military power entails an increase in maintenance spending connected with an increment in forces, and hence in the first group of expenditure. p The classification of expenditure and the structure of the federal budget show the total of direct military expenditures, though the budget contains no data on their respective shares in maintaining and augmenting military power. These data are indispensable for analysing the financial aspect of augmenting military power and for estimating the effectiveness of military expenditures. p Delimitation and estimation of military outlays on this principle is a complicated yet feasible problem. One has to analyse all types of direct military expenditures for their 103 functional purpose to establish what shares of expenditure under a particular budget heading go to maintain and to augment military power.

Let us examine from this aspect Defence Department expenditure on military procurement and on research and development. The increasingly rapid obsolescence of military equipment results in a shortening of its average service life. A special survey conducted in the United States in 1955 showed that it took an average of fourteen years to replace completely the equipment of the armed forces to maintain them in full combat readiness. In 1959 a similar survey indicated that the average service life of military equipment had shortened to ten years, i.e., an average ten per cent of it was to be replaced every year. Provided the average service life is ten years (allowing for the wear and tear and obsolescence) and ten per cent of this equipment is replaced every year, it is possible to establish the respective shares of procurement for augmenting and for maintaining military power. For example, in 1962, the combined value of military equipment in possession of the Defence Department was estimated at 67,600 million dollars. [103•1 One-tenth of this value (6,800 million dollars), i.e., equipment needing replacement on account of wear and tear, represented about forty per cent of the Defence Department’s total procurement expenditure in 1962/63. The remaining sixty per cent went to increase the quantity of equipment in possession of the US armed forces. Needless to say, this is a rough estimate of shares in procurement expenditure. What is more, because of changes in total procurement, they may vary from year to year. The Pentagon’s entire expenditure on R&D, however, goes to increase US military power. This analysis of all budgetary items will show in rough outline the size and share of each group of military expenditure. *** Notes [103•1] U.S. News and World Report, October 8, 1962, p. 51.

1. DEFENCE DEPARTMENT EXPENDITURE

p The Defence Department accounts for the bulk of the US direct military expenditure. In the period from 1950/51 to 1969/70 its share of the total was 88.3 per cent by our 104 Table 11 The Defence (million | Department Budget dollars; per cent) Item of expenditure Fiscal 195! 1953 1955 1957 I960 Military personnel ..... 7,469 6,715 3,976 1,602 440 —437 11,913 10,379 17,123 2,336 1,913 —54 11,062 7,905 12,997 2,349 1,582 —364 11,409 9,487 13,488 2,406 1,968 —323 11,738 10,223 13,334 4,710 1,626 —416 Operation and maintenance Procurement ....... Research, development, test and evaluation ..... Military construction . . . Family housing ...... Civil defence ....... Revolving and management funds and other ..... Total .......... 19,765 43,610 35,531 38,435 41,215 years 1904 1965 1966 1967 1968 1969 1970 1973* 1974* 105 14,195 11,932 15,351 14,771 12,349 11,839 16,753 14,710 14,339 19,787 19,000 19,012 21,954 20,578 23,283 23,818 22,227 23,988 25,880 21,609 21,584 27,527 21,540 15,600 27,206 21,662 16,490 7,021 6,236 6,259 7,160 7,747 7,457 7,166 7,622 8,069 1,026 580 107 1,007 619 93 1,334 647 86 1,536 482 100 1,281 495 108 1,389 572 87 1,168 614 80 1,068 244 87 1,220 464 90 —452 —741 281 389 1,927 -1,661 —951 699 3,089 49,760 46,173 54,409 67,466 77,373 77,877 77,150 74,200 78,200 28.6 23.9 30.8 32.0 26.7 25.6 30.8 27.0 26.3 29.3 28.2 28.2 28.4 26.6 30.1 30.6 28.5 30.8 33.5 28.0 28.0 37.0 29.0 21.0 34.8 27.7 21.0 14.2 13.6 11.5 10.6 10.0 9.6 9.3 10.3 10.2 2.1 1.2 0.2 2.2 1.3 0.2 2.5 1.2 0.2 2.3 0.7 0.1 1.7 0.6 0.1 1.8 0.7 0.1 1.5 0.8 0.1 1.4 0.3 0.1 1.6 0.6 0.1 — —1.6 0.5 0.6 2.5 —2.1 —1.2 0.9 4.0 100 100 100 100 100 100 100 100 100 Military personnel ..... 37 8 27.3 31 1 29 7 28 5 Operation and maintenance Procurement ....... 34.0 20 0 23.8 39 2 22.2 36 6 24.7 35 1 24.8 32 4 Research, development, test and evaluation ..... 8 2 5.4 6 6 6 3 11 4 Military construction . . . Family housing ...... 2.2 4.4 4.5 5.0 3.9 Civil defence ..... Revolving and management funds and other .... —2.2 —0.1 —1.0 —0.8 —1.0 Total .......... 100 100 100 100 100 p * Estimate.

Sources: Statistical Abstract of the United States, 1957, p. 238; 1963, p. 256; 1965, p. 254; The Budget of the United States Government, Fiscal Year 1968, pp. 456–57; Fiscal Year 1971, p. 82; Fiscal Year 1974, pp. 214, 345, 364. 106 estimates and has since increased. President Nixon’s message, to Congress on the budget in January 1973 indicated that in 1973/74 this share would go up to 92.9 per cent as against 87.2 per cent in 1962/63 and 85.4 per cent in 1955/56. Table 11 shows trends and shifts in the structure of Defence Department expenditure. p Military Personnel Maintenance. Before the era of imperialism, military equipment was not sophisticated and its standards varied but slightly from country to country. Military power depended primarily on such factors as the number of soldiers, their training, endurance and courage, the military skill of commanding officers. Therefore, the bulk of direct military expenditure went to maintain and train army personnel. As military technology developed, and armies became mechanised, the share of expenditure on personnel maintenance declined. p Between 1950/51 and 1972/73 this expenditure in the USA totalled 365,000 million dollars, about 30.6 per cent of all Defence Department spending over the period. The USA spends relatively less on armed forces personnel than other imperialist powers and relatively more on military equipment and strategic stockpiles. p In the post-war years, the absolute volume of maintenance spending is far in excess of the pre-war level. This is attributable, first, to the increased numerical strength of forces and, second, to the higher per capita cost of their maintenance and, especially, training. In 1939, the US regular forces had 328,000 officers and men, whereas by mid-1965 the figure had grown to 2,653,000, i.e., eightfold. It was stated in the President’s message to Congress on the budget for 1965/66 that the Administration was planning a reduction in the US armed forces but ’when the Vietnam escalation was started their strength shot up to 3,500,000 officers and men. In recent time, there has been a certain reduction in the US troop strength as part of the implementation of the Nixon Doctrine. p A salient feature of the US armed forces is the high proportion of Air Force and Navy personnel. Modern weapons require more and more time and money for training servicemen in handling them. For instance, 64,500–72,400 dollars is allocated to train one crew member 107 of the aircraft carrier Forrestal in peacetime, and 52,100– 58,500 in wartime. The maintenance and full course of training of one student of the US Military Academy at West Point, N.Y., costs 11,000 dollars. The overall annual expenditure on the West Point Academy runs at 88.5 million dollars. [107•1 The training of the US military personnel cost 4,300 million dollars in 1967/68 and 4,400 million in 1968/69. The training of Air Force personnel is particularly expensive. Although 85 per cent of the US Air Force personnel are high school graduates their training standards fall short of the present level of aviation technology. The Secretary of Defence, in a statement in February 1968, said that an average of 1,500 million dollars a year was spent on the training of US Air Force

pilots. The table below presents data on the cost of training crews for different types of combat aircraft (in thousands of dollars). B-52 B-47 KC-135 Aircraft Commander .... Copilot 1,290 253 489 140 372 105 Navigator . 238 232 91 Radar Navigator ..... Electronic Warfare Officer 419 82 Gunner 47 Boom Operator 46 Total 2 329 861 614 p Source: Aviation Week and Space Technology, June 20, 1960, p. 140. p The US armed forces employ about one million civilians in equipment, maintenance, R&D, construction, procurement and other jobs. In the early sixties, a tendency was in evidence towards employment of servicemen in traditional civilian jobs. Between 1960 and 1964, the number of civilians 108 reduced by 52,800, while that of servicemen increased by 202,000. The pay to civilian employees of the armed forces is not listed under the "Military Personnel" item and comes from other special funds appropriated for the operation and maintenance of military equipment and stores, R&D, etc. p In connection with the Vietnam war the Defence Department decided to employ more civilians so as to transfer non-combatant military personnel to active duty. According to Pentagon sources the replacement of civilians with servicemen in administrative, clerical, supply and technical jobs contributes to a more efficient use of the military personnel funds. p The effectiveness of expenditure on the maintenance and training of servicemen largely depends on their personal qualities, specifically their educational background and the standards of training in regular forces. In the post-war years, there has been a notable improvement in the general educational standards of military personnel, while the Defence Department has taken a series of measures to improve the training of military cadres, as a matter of exceptional importance. p The special courses organised by the Defence Department at many American universities play an important part in advanced training of military officers. To date, some 50 per cent of the US Army officers, 35 per cent of the Air Force officers and 20 per cent of the Navy officers have completed these courses. [108•1 The training of officers at universities costs the Pentagon much less (5,000 dollars per head) than in military colleges (12,000 dollars), while its general standards are higher. [108•2 p Military Procurement. At the turn of the century, military technology began to develop at a markedly faster rate than before. World War I revolutionised weaponry, and it kept up its rapid pace of advance in the twenties and thirties. During and after World War II, military technology advanced faster than ever, and in the last 30 years experienced a fullscale revolution, which brought in its wake such formidable weapons as A- and Hbombs, jet aircraft, strategic missiles, nuclear-powered submarines, etc. 109

p Between 1945 and 1950 US military technology made greater advances than in the whole period between the Civil War and World War I. Looking in retrospect at military technology as it was after World War II until the end of the Korean war, one will see that most of the weapons and equipment procured today were then non-existent and are products of later development. [109•1 Improvements in armaments invariably involved a rise in their cost. For instance, the three battleships of 10,300 tons standard displacement each commissioned in 1895–96 cost 6 to 6.6 million dollars, the two 32,300-ton battleships built in 1920–21, 18 and 20 million dollars respectively. By comparison, the cost of battleships built during World War II 15,000 tons each) ranged from 95 to 115 million dollars, [109•2 while an aircraft carrier in the Midway class (51,000 tons) cost 90 million dollars. A modern carrier such as the America (64,000 tons) commissioned early in 1965 cost 293 million dollars, and the nuclear-powered Enterprise (75,700 tons) operational since 1961, 444 million dollars. Here is another example concerning aircraft technology. An official spokesman of the Convair Division of the General Dynamics Corporation stated that in 1959 prices the cost of the 200th production aircraft fully airworthy would be in the case of a B-17 740,000 dollars, a B-47 4,400,000 and a B-58 6,400,000. So, the cost of a modern B-58 supersonic bomber is 8.7 times that of the B-17 of World War II. The following data released by the Atomic Energy Commission give an idea of the cost of nuclear charges: Yield (range) Cost (thousand dollars) Note About 10 kilotons .... 5 megatons ........ 10 kilotons . . ... 750 1,000 350 Planning estimates Later price 2 megatons . . ... 600 p Source: Engineering News-Record No. 21, May 1964, p. 62. 110 The rapid advancement and increasing complexity of military equipment accompanied by its steadily rising cost lead to increased expenditure on material support of the armed forces. During World War II, the equipment of a US infantry division cost 19 million dollars, whereas, in 1950 the figure rose to 80 million, reaching 111 million in 1964. The following data show the cost of equipment and maintenance of the various types of US army divisions over a period of five years (in millions of dollars): Equipment Maintenance (5 years) Total Airborne ..... 282 705 987 Armoured ........ 182 681 863 Mechanised ........ 155 646 801 Infantry .... 111 582 693 Paratroop ........ 76 579 655 p Source: Wehr and Wirtschaft N. 2, 1966, S. 108. p The procurement of military equipment is listed under corresponding item of the Defence Department budget. The funds available under it go to purchase aircraft, warships and auxiliary craft, missiles and rockets, radioelectronic and communications equipment, tanks and other armoured vehicles, small arms, ordnance and ammunition, etc. Large expenditures for modernising operational military equipment, as well as the

financing of federal purchases of military production facilities, are also listed under this item. p Procurement outlays are a big item of US direct military spending. In the period from 1950/51 to 1972/73 the Pentagon allocated for military procurement over 355,000 million dollars or 30 per cent of its total budget. This enormous expenditure is attributable to the US Government’s efforts to improve steadily the equipment of the US armed forces, to its rapid obsolescence involving the need for early replacement and to its growing cost. p There have been notable changes in procurement patterns (see Table 12). In the period from 1950/51 to 1964/65, an 111 Table 12 Defence Department Procurement (million dollars; per cent) Fiscal years Item of expenditure 1951 1953 1955 1957 I960 1964 1965 Aircraft and parts 2,412 7,416 8,037 8,647 6,272 6,053 5,200 Ships 382 1,191 1,009 842 1,744 2,078 1,713 Missiles 21 295 632 1,855 3,027 3,577 2,096 Electronics and communications 193 1,001 636 881 1,093 1,264 897 Armour, ordnance, small arms, ammunition . . 635 4,603 1,334 761 443 1,597 1,309 Other procurement 333 2,617 1,349 502 755 782 624 Total ..... 3,976 17,123 12,997 13,488 13,334 15,351 11,839 Aircraft and parts 60.66 41.31 61.84 64.11 47.04 39.4 43.9 Ships ...... 9.61 6.96 7.76 6.24 13.08 13.5 14.5 Missiles ..... 0.53 1.72 4.86 13.75 22.70 23.3 17.7 Electronics and communications 4.85 5.85 4.89 6.53 8.20 8.2 7.6 Armour, ordnance, small arms, ammunition . . . 15.97 26.88 10.26 5.64 3.32 10.5 11.1 Other procurement 8.38 15.28 10.39 3.73 5.66 5.1 5.2 Total ..... 100 100 100 100 100 100 100 average of almost a half of the funds was spent on aircraft procurement. Prior to the escalation of the Vietnam war, however, expenditure on aircraft and related equipment showed a relative decline, while that for missiles and rockets increased. At the same time, the share of expenditure on submarines and naval armaments, including conventional types, was on the upgrade. These changes in procurement patterns are traced to two basic reasons: first, the rapid 112 (continued from page 111 Fiscal years Item of expenditure 1966 1967 1968 1969 1970 1972 1973* 1974** Aircraft and parts 6.635 8,411 9,462 9,177 7.948 6,445 5,750 6,052 Ships . ... 1 479 1,398 1 356 1,949 2 066 3.010 2,970 3 902 Missiles ..... 2’,069 1^930 2’,2i9 2,509 2^912 3,402 3,104 2’,885 Electronics and communications . . . 983 1,284 1.595 1,409 1,182 783 973 1,060 Armour, ordnance, small arms, ammunition . 1 642 3 881 6 447 6 590 5 620 3 271 3 365 2 507 Other procurement . U31 2,108 2,204 2,354 1,857 1,847 2,460 2,400 Total ..... 14,339 19,012 23,283 23,988 21.585 18,758" 18,622** 18,806*« Aircraft and parts . 46,2 44.2 40.6 38.3 36.8 34.4 30.9 32.2 Ships ..... . 10.3 7.4 5.8 8.0 9.6 16.0 15.9 20.8 Missiles 14.4 10.2 9.5 10.5 13.5 18.2 16.7 15.3 Electronics and communications 6.9 6.8 6.9 5.9 5.5 4.2 5.2 5.6 Armour, ordnance, small arms, ammunition 11 5 20 4 27 7 27 5 26 0 17 4 18 1 13 3 Other procurement . 10.7 H.’O 9.5 9.8 8.6 9.8 132 12.8 Total ... 100 100 100 100 100 100 100 100 p * Estimate. p ** Total obligational authority.

Sources: Statistical Abstract of the United States, 1957, p. 238; 1963, p. 256; 1965, p. 254; The Budget of the United States Government, Fiscal Year 1966, p. 492; Aerospace Facts and Figures 1970, New York, 1970, pp. 10–11; Space Daily, February 1, 1971, p. 136; Aviation Week and Space Technology, February 5, 1973, p. 14. progress of military technology as exemplified by the development of new, futureoriented weapons systems and the resulting obsolescence of operational equipment. Second, changes in military strategy, notably, the transition from the doctrine of "massive retaliation" to that of "flexible response" which induced the USA to increase its conventional armaments in addition to its nuclear-missile build-up. 113 p The escalation of the US war of aggression in Vietnam had a marked effect on both the volume and structure of military procurement. To satisfy the growing claims of the Vietnam war, the US Administration had to increase sharply military outlays, which totalled 11,839 million dollars in 1964/65, 14,339 million in 1965/66, 19,012 million in 1966/67, 23,283 million in 1967/68, and 23,988 million in 1968/69. These years saw an increase in both the absolute and relative volume of the procurement in the Defence Department’s total spending. p The Vietnam war demanded a drastic increase in the procurement of combat aircraft, ammunition and other conventional weapons and equipment. Since the beginning of the Vietnam escalation expenditure on aircraft procurement showed the steepest rise in absolute terms: from 5,200 million dollars in 1964/65 to 8,411 million in 1966/67, 9,462 million in 1967/68 and 9,177 million in 1968/69. So after a steep increase outlays on aircraft procurement levelled off at a high pitch, but their share in the Defence Department’s total purchases slightly declined. According to American press reports, before March 1968 the US Air Force had lost more planes and helicopters in Vietnam than in the whole of the Korean war, and in terms of value, four times more. Before 1972, the total cost of US aircraft (3,632 planes and 4,839 helicopters) destroyed in Indochina amounted to almost 10,500 million dollars. [113•1 p Ammunition procurement grew at a particularly rapid rate in the years of the Vietnam escalation. In 1966/67, it ran at 3,600 million dollars, a 4.5-fold increase from 1964/65. [113•2 The former US Defence Secretary McNamara stated at one time that in February 1966, the consumption of air-delivered munitions alone by the US forces in South Vietnam was two and a half times the average monthly rate in the three years of the Korean war. [113•3 According to the American press, in the latter half of 1967, the US forces in South Vietnam consumed monthly 80–90 thousand tons and in the summer of 1972, 100 thousand tons of air munitions. In the period 1966– 114 72, the USA spent in Indochina 6.8 million tons of air munitions and 7.3 million tons of ground munitions at a total cost of over 28,000 million dollars. [114•1 p Between 1965 and 1967, both the absolute and relative volumes of missiles procurement declined appreciably. Since 1968, however, they have again been on the upgrade.

p Operations and Maintenance. The mounting supply of military equipment to the US armed forces has swelled its quantity in possession of the Defence Department. This has entailed an increase in expenditure on its maintenance. From 1950/51 to 1972/73, the Defence Department spent for it 315,000 million dollars, or 26.5 per cent of its total disbursements over the period. p The size of expenditure on operations and maintenance is mainly dependent on the overall quantity of military equipment in possession of the armed forces and equally on its performance characteristics. For instance, the fact that 25 per cent of the US strategic bombers are on round-the-clock duty in the air involves greater expenditure on their operation and maintenance. p The Vietnam war demanded a big increase in spending on the operation and maintenance of combat equipment: from 12,349 million dollars in 1964/65 to 19,000 million in 1966/67, and 22,227 million in 1968/69. The following example illustrates the scale of US operation and maintenance expenditure in Vietnam. Strategic B-52 bombers (the operation of each costs over 1,300 dollars an hour) made a ten-hour flight from the Pacific Island of Guam to South Vietnam [114•2 where they dropped their lethal cargo. A US army unit in South Vietnam consumed roughly three times as much fuel as it did in World War II or the Korean war. According to some estimates, the US forces in Vietnam consumed some 5.3 million tons of petroleum products a year. In 1965/66, the US armed forces consumed a total of 41.3 million tons of petroleum products and in 1966/67, 44.7 million tons. p Military Construction. Allocations listed under this item of the Defence Department budget go to finance the building 115 of airfields, harbour facilities, missile bases and testing ranges, air defence, ABM and civil defence facilities, strategic roads, barracks, operational, training, medical, administrative, repair and production, research and development centres, warehouses and depots, electric power stations, family housing, and a wide range of other military installations, as well as the purchase of land for military building projects. p The character and volume of military construction widely vary with standards of military technology. Before World War II, comparatively small funds were spent on military construction, mostly for building barracks, strategic roads, airfields and harbour facilities. After the war, the main types of military construction were missile sites and testing ranges, air defence and anti-missile facilities, air force and naval bases, training centres and proving grounds. p Intercontinental ballistic missiles can be fired only from special sites equipped with launching, maintenance and storage facilities, tunnels, personnel shelters, communications equipment, etc. The construction of missile sites often accounts for a sizable share of the total expenditure on missiles. For instance, the construction of the surface and underground launching facilities for a squadron of fifty Minuteman missiles cost twenty million dollars. The launching facilities of an Atlas missile squadron cost 28 million dollars, Atlas-E, 37.2 million, Atlas-F, 44 million, Titan 1, 50 million, and Titan

2, 35 million. Construction of missile testing ranges also requires large outlays. The USA is developing a comprehensive strategic anti-aircraft and anti-missile defence programme involving enormous construction work. p Military construction appropriations in 1972/73, including family housing, totalled 1,312 million dollars, or 1.8 per cent of the Defence Department budget. US spending on military construction from 1950/51 to 1972/73 totalled 39,000 million dollars, or 3.3 per cent of all Defence Department expenditures. p Research and Development. US outlays on military R&D are growing rapidly. Before World War II, overall federal spending on R&D was fairly moderate, rising from about ten million dollars a year at the turn of the century to under one hundred million in the early thirties. Most of it went into agricultural research, nature conservation and study, and a 116 small share, into military work. In 1938, a mere one-fifth of federal research spending went into military work, and onethird into agriculture. [116•1 Private firms, universities and colleges conducted and financed the bulk of research work: in 1940, they provided about eighty per cent of all research money. p During World War II, important changes were made in the organisation and financing of research, and federal spending on research and development was increased drastically to meet the war demand. Vigorous efforts were made to organise regular research to improve military equipment and develop new types of weapons. Special teams of scientists, engineers and military personnel set up for this work were generously financed by the federal government. The atom bomb development alone, or the Manhattan Project, cost 2,000 million dollars. Specialised research projects making extensive use of general progress in science and technology culminated in revolutionary developments in military technology, such as the atom bomb, the radar, the proximity fuse, to mention but a few. p US expenditure on military research and development has been growing particularly rapidly after World War II, the bulk of it coming from the Defence Department budget. In 1949/50 Defence Department expenditure on R&D totalled 1,600 million dollars, whereas in 1969/70 the figure rose to 7,200 million. (In 1940, the US military R&D effort amounted to a meagre 30 million dollars.) [116•2 Between 1950/51 and 1972/73, the Defence Department’s total R&D expenditure was approximately 118,000 million dollars, or 10 per cent of all military spending over the period. This figure, however, does not represent all of the Defence Department’s expenditures on R&D. A share of this expenditure (in the early fifties, a particularly large share) is listed under military budget items on procurement, military construction, operations and maintenance, and civil defence. p There is a pronounced tendency towards an increase in military R&D expenditure which was particularly rapid both in absolute and relative terms between fiscal years 1960 and 117 1961, mainly due to a steep rise in spending on missile systems development. Later, the growth of R&D expenditure slowed down and its share in the Defence Department’s total disbursements diminished since the rapid increase in US military expenditures was attributable mostly to the Vietnam war.

p In a bid to increase further US military power and gain a military superiority over the Soviet Union, the American imperialists annually spend huge sums on R&D programmes, so as to improve the existing and develop new, more effective weapons systems. A considerable share of the Defence Department outlays on R&D goes to finance missile development programmes (see Table 13), including the Poseidon missile project and the improvement of the Minuteman-3 ICBM. A good deal of attention is paid to the development of the B-l strategic bomber, the Trident sea-based ballistic missile system, and the development of new strategic missiles. Large-scale work is in progress to develop military space weapons. p In the field of small arms, ordnance and ammunition development the attention is focussed on increasing the fire power and also on developing more effective means of antiguerilla warfare for use in certain remote parts of the world with unfamiliar and difficult surroundings. p It is of interest to see how the Pentagon’s allocations on R&D are distributed among the three military departments. As Table 14 indicates, although the share of the Air Force has slightly diminished, it remains fairly large. On the other hand the shares of the Army and Navy have grown. These changes were attributable to changes in the US military strategy and the decision to equip the US forces in Vietnam with more effective types of weapons and equipment better suited to local conditions. In 1965 US spending on R&D connected with the Vietnam war amounted to 70 million dollars, whereas by 1967 this figure had grown tenfold to reach some 700 million dollars. [117•1 p Adding to the Defence Department’s R&D expenditure similar spending of the Atomic Energy Commission and 118 Table 13 Specification of Defence Department Expenditures on Research and Development (million dollars; per cent) Fiscal years Item of expenditure 1960 1963 1965 1967 1970 1972 1973* 1974* Basic research . 362 838 573 618 509 532 488 518 Aircraft . . . 632 544 1,017 1,199 1,641 1,969 1,836 1,780 Missiles .... 2,059 2,241 1,901 2,456 2,280 1,801 2,095 2,254 Ships and craft . 154 219 249 288 305 494 583 620 Ordnance, combat vehicles and related equipment .... 222 208 330 357 332 363 350 414 Space exploration 512 946 921 961 638 389 408 603 Other 769 1,380 1,245 1,410 1,746 2,036 2,259 2,366 Total .... 4,710 6,376 6,236 7,289** 7,451** 7,584** 8,020** 8,555** Basic research . 7.69 13.14 9.2 8.5 6.8 7.0 6.1 6.2 Aircraft .... 13.42 8.53 16.3 16.4 22.0 26.0 22.9 20.8 JM/ssiles .... 43.72 35.15 30.5 33.7 30.6 23.7 26.0 26.3 Ships and craft . 3.27 3.43 3.9 4.0 4.1 6.6 7.3 7.2 ( rdnance, combat vehicles and related equipment .... 4.71 3.26 5.3 4.9 4.5 4.8 4.4 4.8 Space exploration 10.87 14.84 14.8 13.2 8.6 5.1 5.1 7.0 Other . . . . 16.32 21.65 20.0 19.3 23.4 26.8 28.2 27.7 Total .... 100 100 100 100 100 100 100 100 p * Estimate. p ** Total obligational authority

Sources: Monthly Labor Review, May 1964, p. 514; The Magazine of Wall Street, February 5, 1966, p. 482; Appendix to the Budget of the United States Government, Fiscal Year 196U, 1968, p. 308; Space Week, January 29, 1971, p. 30; Aviation Week and Space Technology, February 5, 1973, p. 14, 119 Table 14 Defence Department R&D Expenditures by Military Departments Department of Department Department Other Fiscal Total, the Air Force of the Navy of the Army year mil. dollars mil. per mil. per mil. per mil. per dollars cent dollars cent dollars cent dollars cent 1961 6,131 3,300 53.8 1,435 23.4 1,207 19.7 189 3.1 1962 6,319 3,493 55.2 1,364 21.6 1,280 20.3 182 2.9 1963 6,376 3,301 51.8 1,429 22.4 1,355 21.2 291 4.6 1964 7,021 3,722 53.0 1,578 22.5 1,338 19.1 383 5.4 1965 6,236 3,146 50.4 1,294 28.8 1,344 21.6 452 7.2 1966 6,259 2,948 47.1 1,407 22.5 1,412 22.5 492 7.9 1967 7,160 3,229 45.1 1,791 25.0 1,634 22.8 506 7.1 1968 7,747 3,800 49.1 2,003 25.8 1,434 18.5 510 6.6 1969 7,457 3,386 45.4 2,045 27.4 1,521 20.4 505 6.8 1970* 7,451 3,081 41.4 2,272 30.4 1,639 22.0 459 6.2 1971* 7,109 2,810 39.5 2,196 30.8 1,602 22.5 501 7.0 1972* 7,584 2,928 38.6 2,411 31.8 1,792 23.6 453 6.0 1973* 8,020 3,120 38.9 2,542 31.7 1,885 23.5 473 5.9 1974* 8,555 3,213 37.6 2,709 31.7 2,109 24.7 525 6.0 p * Total obligational authority. Sources: The Budget of the United States Government, Fiscal Year 1968, pp. 238–39; Fiscal Year 1969, pp. 274–75; Aerospace Facts and Figures 1970, New York, 1970, p. 63; Space Week, January 29, 1971, p. 30; Aviation Week and Space Technology, Februarys, 1973, pp. 14–15. NASA we shall see that approximately 80 per cent of federal R&D spending has a distinct military character (see Table 1.5). p The growing expenditure on military research and development and the intensified militarisation of American science have been accompanied by an increase in the federal share of overall spending on research and development, both military and civilian. In 1940, this share was 20 per cent, and as large as 90 per cent during World War II. In the early post-war years, the government share showed a marked decline, but since the late forties it began to grow again along with a rapid increase in government spending on military R&D and remained at near 60 per cent (see Table 16). 120 p Table 15 Budget Expenditure for Research and Development Fiscal year Total, mil. dollars Department of Defence* NASA AEC Other mil. dollars per cent mil. dollars per cent mil. dollars pelcent mil. dollars per cent 1954 3,148 2,487 79.0 90 2.9 383 12.2 188 5.9 1955 3,308 2,630 79.5 74 2.2 385 11.6 219 6.7 1956 3,446 2,639 76.6 71 2.1 474 13.7 262 7.6 1957 4,462 3,371 75.5 76 1.7 657 14.7 358 8.1 1958 4,990

3,664 73.4 89 1.8 804 16.1 433 8.7 1959 5,803 4,183 72.1 145 2.5 877 15.1 598 10.3 1960 7,738 5,654 73.1 401 5.2 986 12.7 697 9.0 1961 9,278 6,618 71.3 744 8.0 1,111 12.0 805 8.7 1962 10,373 6,812 65.7 1,257 12.1 1,284 12.4 1,020 9.8 1963 11,988 6,849 57.1 2,552 21.3 1,335 11.1 1,252 10.5 1964 14,694 7,517 51.2 4,171 28.4 1,505 10.2 1,501 10.2 1965 14,875 6,728 45.2 5,093 34.3 1,520 10.2 1,534 10.3 1966 16,002 6,735 42.1 5,933 37.1 1,462 9.1 1,872 11.7 1967 16,842 7,680 45.6 5,426 32.2 1,467 8.7 2,269 13.5 1968 16,865 8,148 48.3 4,724 28.0 1,593 9.5 2,400 14.2 1969 16,164 7,858 48.6 4,252 26.3 1,654 10.2 2,400 14.9 1970 15,098 7,424 49.2 3,699 24.5 1,346 8.9 2,629 17.4 1971 15,005 7,541 50.3 3,337 22.5 1,303 8.7 2,824 18.8 1972** 15,779 8,031 50.9 3,137 19.9 1,308 8.3 3,303 20.9 1973** 16,480 8,177 49.6 3,131 19.0 1,375 8.4 3,797 23.0 p * Includes expenditure under the R&D heading and similar expenditures under other Defence Department budget headings. p ** Estimate. p Sources: The Budget of the United States Government, Fiscal Year 1966, p. 460; Statistical Abstract of the United States, 1967, p. 538; Aerospace Facts and Figures 1970, p. 62; Special Analysis of the U. S. Government Fiscal Year 1973, Washington, 1972, p. 281. p The growing role of scientific and technological progress in economic and militaryeconomic potential, the need for extensive uses of achievements in science and engineering to solve military and other national problems, as well as the increase in the absolute and relative volume of research and development expenditure have induced the US Government to change its attitude to science. Before World War II, the federal government played a minor role in organising and 121 Table 16 US Total Research and Development Spending* 1953 1955 1957 1960 1965 1967 1970" 1971" Total (mil. dollars) 5,160 6,270 9.900 13,710 20,449 23,680 26,850 27,850 1 mil. Federal gov- 1 dollars ernment [ per 2,760 3,490 6,100 8,720 13,025 14,451 14,750 14,735 J cent 53.5 55.7 61.6 63.6 63.6 61.0 55.0 53.0 Private com- 1 dollars panies ( per 2,240 2,510 3.460 4,510 6,541 8,145 10,810 11,780 J cent 43.4 40.0 34.9 32.9 32.0 34.4 40.2 42.3 Colleges and 1 dollars universities [ per 120 190 230 330 615 753 930 960 J cent 2.3 3.0 2.3 2.4 3.0 3.2 3.4 3.4 Non-profit > mil. corpora- 1 dollars tions j per 40 80 110 150 268 331 360 375 J cent 0.8 1.3 1.2 1.1 4.3 1.4 14 1.3 p * Calendar years. p ** Estimate. Sources: Statistical Abstract of the United States, 1967, p. 537, 1970, p. 519; 1971, p. 509. funding R&D activities, whereas after the war its role has been decisive.

p The militarisation of American science has produced a situation where the biggest share of federal R&D money is spent by the Department of Defence, through which, incidentally, the federal government interferes directly in the organisation and financing of basic and industrial research. p Before World War II, small research projects were handled by individual armed services using mostly their own laboratories, arsenals and other facilities. During World War II, when the scope of research and development expanded and science acquired greater military importance, a special civilian agency, the Office of Scientific Research and Development, was set up, which had its own -budget and authority to select and approve R&D projects for the armed forces. This office, which had helped stimulate the 122 development of military technology, was abolished after the war, and almost all responsibility for the management of R&D, with the exception of nuclear research, was again vested in three military departments. p The National Security Act of 1947 started a process which eventually led to greater coordination and centralisation of R&D within the armed services in peacetime. Responsibility for co-ordination of R&D was first vested in the Munitions and Research and Development Boards and later, when the Boards were abolished, in the Assistant Secretaries of Defence for Supply and Logistics and for Research and Development. The powers of the Defence Department in the management of military R&D became particularly wide after 1958 when the Office of the Director of Defence Research and Engineering (DDR&E) was set up. p The next step towards more centralised management of R&D came in 1958 when the Advanced Research Projects Agency was set up to take charge of major long-term R&D programmes on which there was no final agreement as to whether these were within the scope of an individual military department or whether they affected the interests of two or more departments. These and other measures enhanced the guiding role of the Defence Department in R&D work. It should be said, however, that before 1961 most problems relating to the initiation of R&D projects and the evaluation of weapons systems were solved in a decentralised way by the military departments concerned. In 1961, the situation changed drastically. The co-ordination of R&D programmes was greatly increased, as was the centralisation of decisionmaking pertaining to these programmes. The role of the Director of Defence Research and Engineering, who is directly responsible for administering military R&D programmes, grew immeasurably. The DDR&E is also an Assistant Secretary of Defence and his chief adviser on science and engineering. p As of 1964, the staff of the Office of the Director of Defence Research and Engineering included a total of 561 officials of whom 180 were civilian professionals, 153 military specialists and the remaining 228, both civilian and military, provided clerical help. These figures include the Advanced Research Projects Agency and the Weapons 123 System Evaluation Group, both of which are under the control of the DDR&E. [123•1

p The Office of the Director of Defence Research and Engineering has 80 major and a large number of smaller laboratories and research centres employing a total of over 30,000 research scientists and technicians, both civilian and military. Apart from that, the Office supervises the work of a great number of persons engaged in R&D carried by private companies. p Under the old procedure of drafting the military budget, before 1961, when the PPB system was adopted, the R&D budget of the Defence Department was broken down into the following four accounts: the Army, the Navy, the Air Force and Defence Agencies. Within each of these the budget plan was itemised as: military sciences, aircraft, related equipment, missiles and military astronautics, ships and craft, ordnance and combat vehicles, programme-wide management and support. p This system of funding R&D activities had a number of essential defects. In particular, as some high-ranking Defence Department officials admitted, it hampered co-ordination of R&D projects, was the cause of too much duplication and led to ill-considered and premature initiation of new projects. Under the old system it was impossible to ascertain which part of the total R&D expenditure went into basic research and which into applied research or into the development of new weapons systems. What is more, the old system retarded basic research essential for developing new weapons systems. p The adoption of PPB represented a clear advance on the old procedure. Now, R&D conducted within the military departments are brought together and evaluated in the higher echelons as an integrated "program package" which, in turn, comprises "program elements" that include hundreds of projects each. Finally, each project is composed of tasks. For instance, the Pentagon’s overall R&D program package for 1971 covered 495 program elements which included thousands of individual projects and the latter, thousands of tasks. 124 p R&D program packages and program elements are planned for a period of five years and form an integral part of the existing five-year programme of armed forces development and funding. Relevant parameters of the programme form the basis on which annual R&D budgets are developed. p To improve control over the progress of R&D and perfect the cost-effectiveness evaluation of projects in 1963/64 the entire R&D programme of the Defence Department was divided into six categories. The categories were defined in the American literature as [124•1 : p 1. Research. p Research includes all efforts directed towards increased knowledge of natural phenomena and the environment, and towards the solution of problems in physical, behavioural and social sciences, problems which have no clear, direct military

application. By definition, “Research” includes all basic research in addition to applied research directed towards expanding knowledge in various scientific areas. It does not include efforts to prove the feasibility of solutions to problems of immediate military importance or of time-oriented investigation and developments. p 2. Exploratory Development. p This includes all efforts to resolve specific military problems short of major development projects. These efforts may vary from fundamental applied research to sophisticated experimental hardware, study, programming and planning efforts. The dominant characteristic of this category of effort is that it is pointed towards specific military problem areas, with a view to developing and evaluating the feasibility and practicability of proposed solutions and determining their parameters. p 3. Advanced Development. p Advanced development includes all projects that have moved into the development of hardware for experimental or operational tests. Advanced development is characterised by line-item projects, normally involving hardware designed for test or experimentation as opposed to that designed and engineered for eventual service use. 125 p 4. Engineering Development. p Engineering development includes development programmes being engineered for service use but not yet approved for production or operation. This area is characterised by major line-item projects. p 5. Operational-Systems Development. p This area includes research-and-development effort directed towards developing, engineering and testing systems, support programmes, vehicles and weapons that have been approved for production and service use. p 6. Management and Support. p This category includes research-and-development effort directed towards the support of installations and operations required for general research-and-development use. It includes test ranges, military construction, maintenance of laboratories, operation and maintenance of test aircraft and ships. p The first three categories—Research, Exploratory Development and Advanced Development—provide the scientific and technological basis for developing new types of weapons and military equipment. Engineering Development and Operational-Systems Development deal with the development, testing and evaluation of specific weapons

systems and their adoption for service use. Thus, the above-mentioned R&D categories represent successive stages of a single process which results in the development of new types of weapons and military hardware. p Advanced Development supplies the connecting link between the successive stages of research effort to provide new scientific and technological knowledge and the development phases where the new knowledge is used to actually develop and engineer specific weapons systems. It is at this stage that military requirements and the available and future technical possibilities are first correlated. Military equipment developed at this stage or individual parts thereof are designed for use as "building blocks" in the engineering of the proposed weapons systems. The funding of the above-mentioned R&D categories is conducted individually. Table 17 indicates the distribution of the Defence Department expenditures among the six R&D categories. There is no precise information on the structure 126 of R&D expenditures broken down by category for an earlier period since the Defence Department has only recently adopted the new system of allocating R&D funds. As the data in Table 17 show, the bulk of the Pentagon’s expenditure on R&D goes to finance the development of specific weapons systems and programme-wide management and support. In recent years, the share of expenditure on the development of particular weapons systems has declined, while the proportion of expenditure on advanced development has been on the upgrade. About 5 per cent of the Defence Department outlays on R&D goes into basic research. Table 17 DOD Expenditures on R&D by Categories (million dollars; per cent) Fiscal year Research Exploratory development Advanced development Engineering and operational-systems development Management and support .1964 348.3 1,116.6 611.3 3,610.1 1,031.0 1965 354.0 1,121.7 572.1 3,127.0 1,045.0 1966 379.3 1,141.6 754.9 2,973.3 1,064.2 1968 408.0 998.0 1,250.0 3,630.0 1,800.0 1970 324.4 920.4 960.7 4,006.9 1,245.5 1971 321.4 916.6 1,037.9 3,591.0 1,242.3 1972 321.9 1,005.9 1,456.7 3,271.9 1,155.5 1964 5.2 16.7 9.1 53.8 15.4 1965 5.7 18.0 9.2 50.4 16.8 1966 6.0 18.1 12.0 47.1 16.8 1968 5.0 12.1 15.6 45.0 22.3 1970 4.4 12.3 12.9 53.7 16.7 1971 4.5 12.9 14.6 50.5 17.5 1972 4.1 12.7 18.5 50.1 14.6 p Sources: Defense Management, ed. by Stephen Enkc, pp. 280–81; Business Week, December 16, 1967, p. 65; Electronic Market Data Book, 1971, Washington, 1971, p. 57. p The data in Table 17 give but a rough idea of the distribution of appropriations between individual R&D 127 categories as it is extremely difficult to observe this principle of dividing and financing different categories and stages of research and development. Not infrequently, within the operational-systems development category, a variety of unforeseen technical pitfalls demand further basic or applied research. There are cases, also, when for some urgent military considerations it becomes necessary to move a project into the engineering development stage before the requisite technology has been fully worked out in the advanced development phase.

p The division of R&D programmes into the above-mentioned categories makes it possible within the framework of each to compare cost and benefit and to evaluate effectiveness from the standpoint of achieving the objectives set and the effort put into a particular R&D category. In the past, for example, basic research and exploratory efforts were justified by the development of new weapons systems which resulted in the introduction into the development phase of a large number of systems the. technology for which had yet to be developed (this incidentally often ended in failure or caused considerable waste), whereas today these projects are not tied to the development of specific military weapons systems and are evaluated on the basis of the contribution they make to the advancement of scientific and technological knowledge. Expenditures on engineering and operationalsystems development are evaluated from the angle of their military effectiveness and cost. p In the past, individual military departments often initiated the development of a new weapons system before reliable data on its cost and effectiveness were available, in the absence of any clue as to whether the proposed system would justify the production and operation costs involved. Today, the Defence Department insists on a close scrutiny of a proposed project for its likely cost and effectiveness before authorising actual development. p Top Pentagon officials hold that at the exploratory development stage, when the scientific and technological basis for the development of new weapons systems is formed, it is desirable to study a variety of alternative projects, as well as to examine carefully duplicating projects, but while development is in progress unworkable projects must be sifted out 128 to leave the most effective weapons systems for further development and production. In this situation, it is only to be expected that far more R&D projects are initiated than completed. The scrapping of unworkable R&D programmes is the result of periodical reviews when the draft budget is being drawn up and the decision is taken as to whether a given programme should be transferred from one stage of development to another and when military requirements are specified in the light of changed conditions, etc. p In recent years, the Pentagon has taken a series of measures to ensure that duplication, which formerly was rather commonplace, is not allowed to happen at the engineering development stage and at the final stages which culminate in the development of specific weapons systems. To eliminate duplication the Defence Department now insists that as early as the advanced development stage, each project be dovetailed with its intended service use and that its potential service utility and cost are ascertained. Today, the development of a specific weapons system cannot be started until it gets beyond the socalled project definition phase, i.e., until its development has not been shown conclusively to be worthwhile. p The overriding end objective of all military R&D projects in the United States is to achieve superiority over the potential enemy and ensure greater effectiveness of militaryeconomic activity through systematic updating of weapons and materials and streamlining the management of the armed forces development generally.

p Procurement of existing types of weapons and materiel, as well as those which are still in design form, results mainly in a quantitative increase of the country’s military power. Military R&D by contrast are aimed at qualitative improvement of weapons systems’ characteristics (their destructive capacity, accuracy, reliability, the achievement of hitherto unattainable military objectives, etc.) which would enhance the capability of the armed forces to achieve their objectives with greater dependability and with less effort and money, in other words would ensure greater effectiveness of the country’s overall military spending. Otherwise R&D projects become a sheer waste of effort and money since there is no point in equipping the armed forces with weapons which are 129 not superior to comparable existing types from the standpoint of cost-effectiveness. p The organisational defects persisting in the management of R&D, their subordination to the monopolies’ drive for greater profits coupled with the competition among corporations and other causes linked with the social and economic system of the United States have resulted in a large unproductive waste of funds, duplication and lower efficiency of research. According to some estimates, the Defence Department’s unproductive expenditure due to unwarranted duplication amounted to 2,000 million dollars a year in the late fifties and early sixties. p The efficiency of military R&D programmes is estimated, basically, by measuring the cost of weapons systems against their combat effectiveness and reliability. p Following an analysis of the cost-effectiveness formula the Department of Defence has revised R&D programmes and proceeded to discontinue work on many weapons systems on account of either their built-in obsolescence, technological undependability or unjustified expenditure on their development and production. Examples include the scrapping in 1961 of the nuclear-powered aircraft project which had cost a total of 511,600,000 dollars, since development was initiated over ten years previously. In 1963, the Pentagon cancelled the GAM-87 Skybolt project, then in the test stage, which had cost 440 million dollars. Altogether, between 1953 and 1968, the Defence Department cancelled 65 projects which had cost more than 10,500 million dollars. [129•1 p The Defence Department’s measures to improve the management of armed forces development also make for greater effectiveness of military R&D programmes. However, these measures could not and have not eliminated all defects and difficulties. For instance, the private monopolies, which fulfil the bulk of R&D contracts, still look upon them as a source of fat profits and this tends to militate against the effectiveness of federal government spending on these purposes. Apart from that, difficulties persist which spring not so much from the socio-economic system of American society as from the 130 highly specific R&D environment. For instance, when military projects are in the planning stage, a number of uncertainties inevitably crop up which make it more difficult to decide on the best direction for the research effort to follow. Similar difficulties often plague the choice of the optimum weapons system. p Today, it takes from five to ten years to develop an operational weapons system and there is a clear tendency towards an increasingly longer lead-time owing to the growing

complexity of modern weapons systems. The useful service life of weapons systems currently ranges from five to fifteen years. So when selecting a new weapons system a decision is taken which largely influences military allocations for a fairly long period ahead (from five to twenty-five years), while the effectiveness or ineffectiveness of this decision and of the expenditure entailed depends on many uncertain developments that may take place in the interim: things like advance in military technology and the development of new, more effective ways of attaining a particular military objective, further progress in weapons development by the potential enemy, changes in military policy and strategy, etc. The US Government has been careful to foresee these and similar developments as far as possible with a view to reducing their adverse impact. Great efforts are being made to forecast the future progress of science and engineering so as to provide the managers of R&D programmes with adequate information to be used in long-term planning. Apart from that, the Department of Defence is trying to tailor R&D in such a way as to be capable of greater flexibility in meeting future military requirements. To this end, much attention is paid to those R&D stages which provide the scientific and technological base for the development of novel weapons systems. Now that the rapid progress of military technology has considerably accelerated obsolescence of military equipment (sometimes weapons systems are found to be outdated as early, as the development stage) with the attendant financial waste and other adverse consequences, it is vital to improve advanced development which results in weapons subsystems and the so-called building blocks that can be brought together within a relatively short time to develop a new weapons system modified to meet the changes 131 in military requirements that have come about in the meantime. p The unprecedented extent of the militarisation of American science ensures the rapid development of military technology in the USA. Over the past 30 years, many novel weapons systems have been developed. The period since the last world war has seen a number of qualitative changes in overkill weapons, changes exemplified in the development of thermonuclear weapons as an advance on atomic ones, in the evolution from strategic manned bombers to ICBMs, from launching pads to missiles placed in silos or carried by submarines, from single to multiple warheads packaged in a large missile and capable of hitting several targets at a time (MIRVs), etc. p These weapons in possession of the USA serve the schemes of US imperialism aimed at preserving and consolidating its positions in the world and are used as a tool of its great power policy. Hence the pronounced offensive orientation of American military science. This imposes on the US scientists involved in military research tremendous responsibility to mankind for the devastating consequences of a possible world war. p Interviewed by the West German Der Spiegel on the influence of the military on the US universities and educational system generally, the eminent economist John K. Galbraith said that the United States militarised university research to the extreme and that it was time for scientists to ask themselves whether they served mankind by putting their talent at the Pentagon’s service.

p The militarisation of US science poses a great threat to mankind. The destructive capacity of modern weapons is steadily growing, the development of ever newer and more deadly weapons is accompanied by a rapid rise in their cost which means still heavier burden on the national budget. p Civil Defence. The USA is taking steps to improve the existing air, missile and space defence system and set up a civil defence system. Top Pentagon officials believe that an adequate anti-missile defence system as a protection for the civilian population largely depends for its effectiveness on the existence of a matching civil defence 132 system. In the absence of a sufficient number of radiationproof shelters in the event of a massive nuclear attack the country’s active defence system will fail to provide dependable protection for the population and this will result in prohibitive human casualties. It is further argued that a wellorganised civil defence system based on an adequate number of fallout shelters can be a far more paying proposition from the standpoint of costeffectiveness and can save a far greater number of human lives than the further enlargement of the strategic nuclear strike forces and the air and missile defence systems. p The setting up of a civil defence system is a costly project. For instance, the construction of the standard control centre of the district civil defence system (it is proposed to have eight such centres in different parts of the United States) in an area five kilometres east of Denton, Texas, has cost 2.7 million dollars. This major underground shelter covers an area of 8.1 hectares and is designed to provide protection from the blast of a 20-megaton H-bomb at a distance of five kilometres from the epicentre. The shelter accommodates 500 people and has enough supplies to last them 30 days. p The Joint Chiefs of Staff find it necessary over the next few years to carry out an enlarged programme of radiationproof shelter construction for the civilian population at an estimated cost of some 5,200 million dollars, of which the federal government will put up 2,000 million and the remainder will come from state and local government and from private subscription. Between 1961/62 and 1971/72 the Defence Department expenditure on civil defence amounted to 1,105 million dollars. Not all federal outlays for civil defence, however, come directly from the budget. For instance, individuals and organisations granted federal loans for housing construction are obliged to build fallout shelters at a cost repaid with corresponding tax reliefs. Thus, although this spending is not listed as such in the federal budget, it reduces federal revenue and is in effect government spending on civil defence. The US overall expenditure on civil defence is far greater than that of the Defence Department, since the authorities of states, private companies and individuals also invest large sums in civil defence. 133 The Pentagon’s spending as examined here covers only the bigger items for which the military budget is prepared and approved. Since the structure of military spending has a direct bearing on the power of the armed forces, examination of US budgetary appropriations by program packages is of definite interest.

Table 18 Summary of the Department of Defence Budget Programme (Total obligational authority, thousand million dollars) Fisca years 1962 1964 196C 1968 1970 1972 1973 1974 Strategic forces 11.3 9.3 6.7 7.2 7.4 7.5 7.4 7.4 General purpose forces ..... 17.9 17.9 29.5 30.4 27.7 25.2 25.7 26.4 Intelligence and communications 3.2 4.3 5.0 5.5 5.6 5.4 5.7 6.0 Airlift and sealift 1.0 1.1 1.6 1.8 1.7 1.1 0.9 0.8 Guard and reserve 1.8 1.9 2.3 2.2 2.6 3.3 4.0 4.4 Research and development .... 4.3 5.0 4.8 4.3 4.9 6.1 6.5 7.4 Central supply and maintenance . . 3.8 4.1 5.6 8.4 9.1 8.5 8.7 8.4 Training, medical and general personnel activities 4.9 5.5 7.5 12.2 13.7 15.5 16.4 18.2 Programme-wide management . . 2.2 1.8 3.2 3.0 3.8 4.2 4.6 4.6 Total ...... 50.4 50.9 66.2 75.0 76.3 76.8 79.9 83.6 p Sources: Aviation Week and Space Technology, February 5, 1968, p. 15; The Budget of the United States Government, Fiscal Year 1970, p. 76; Fiscal Year 1972, p. 89; Fiscal Year 1973, p. 74. To speed up the development and deployment of strategic forces (mainly squadrons of Minuteman missiles and Polaris-carrying submarines) the US Government sharply increased corresponding expenditure in the early sixties. Later, spending on the strategic forces began to decline both 134 absolutely and relatively, yet it remained large enough to support their continued growth. In recent years, spending on the strategic forces has again been on the upgrade, with the main emphasis being laid on missiles. By mid-1964, the number of ICBMs and Polaris missiles had equalled for the first time that of strategic manned bombers capable of carrying atomic and hydrogen bombs. After 1964, the balance began to change in favour of missiles. The Pentagon plans to retain manned bombers for the next few years, but their share in the strategic forces will shrink. The smaller expenditure on general-purpose forces is the result of slight US troop reductions and the implementation of the Nixon doctrine. *** Notes [107•1] Army Times (I lie American Weekend), February 1, 1967, [108•1] Ordnance, May-June 1969, p. 617. [108•2] Army, February 1971, p. 31. [109•1] Military Review, June 1961, p. 5. [109•2] M. Slade Kendrick, A Century and a Half of Federal Expenditures, p. 61. [113•1] U.S. News and World Report, November 13, 1972, p. 29. [113•2] Business Week, February 10, 1968, p. 68.

[113•3] Fortune, April 1966, p. 122. [114•1] U. S. News and World Report, November 13, 1972, p. 29. [114•2] Fortune, April 1966, p. 122. [116•1] Don K. Price, Government and Science, New York, 1954, pp. 35–36. [116•2] M. J. Peck, F. M. Scherer, op. cit., p. 71. [117•1] Business Week, December 16. 1967, p. 61. [123•1] Missiles and Rockets, March 30, 1964, p. 30. [124•1] Defense Management, ed. by Stephen Enke, New Jersey, 1967, pp. 271–72. [129•1] Seymour Melman, Pentagon Capitalism. The Political Economy of War, New York, 1970, pp. 177–79.

2. AEC AND NASA EXPENDITURES

p The US direct military expenditures are not confined to those of the Defence Department but include the bulk of outlays for the Atomic Energy Commission which is engaged, among other things, in the development and manufacture of nuclear weapons. [134•1 p The development and manufacture of new types of nuclear weapons are brought in line with the available stockpiles and Defence Department recommendations on federal approval. The USA has been spending huge sums for the production and improvement of nuclear weapons—about 55,000 million dollars from mid-1940 to mid-1973. An estimated 70 per cent of AEC expenditure goes into military work. The President’s message to Congress on the budget for 1972/73 envisaged a total of 2,374 million dollars for the AEC, which is 80 million more than in the previous year. [134•2 Expenditure on the purchase of uranium concentrates and the production of special fissionable materials has been on the downgrade. Following the signing of the treaty banning nuclear tests in 135 the three media the United States continued intensive work on the improvement of existing and the development of new nuclear weapons. As a result, the AEC needs more money to improve nuclear weapons, carry out underground tests and maintain its preparedness, jointly with the Pentagon, to resume nuclear tests in the atmosphere in case of need. The AEC spends most of its funds on research. For example, in 1972–73, its share was over sixty per cent. [135•1 p In the first half of the sixties, US expenditure on space exploration grew at a brisk pace. This was motivated by the spectacular space achievements of the Soviet Union. p Space exploration in the United States is conducted by the National Aeronautics and Space Administration (NASA), the Atomic Energy Commission, the National Science Foundation and other agencies.

p The National Aeronautics and Space Administration set up in 1958 is in charge of policy and research co-ordination in space exploration. NASA is under the control of the National Aeronautics and Space Council which directs and coordinates the work of all departments and institutions involved in aeronautic and space programmes. The Council Chairman is the US Vice-President and its members are the Secretary of Defence, the Secretary of State, the NASA Director and the AEC Chairman. p Space exploration demands great expenses. It costs some 20 million dollars to launch a Saturn space rocket. Taking part in the space programme are about 20,000 companies (prime contractors and subcontractors) with a total of 420,000 employees, and 150 institutions of higher learning. [135•2 p As Table 19 indicates, NASA accounts for the bulk of the overall expenditure on space exploration. It spends most of its funds on space research and manned space flight programmes. p NASA spent 2,923 million dollars on the Apollo project in 1966/67, 2,556 million in 1967/68, 914 million dollars in 1969/70, and approximately 612 million dollars in 1971/72. The overall cost of the project was estimated at 25,000–26,000 136 Federal Space Prog ramme Expenditures (million dollars) Fiscal 1959 I960 1961 (962 1963 NASA** ......... 59 341 33 2 329 518 41 694 710 64 1,226 1,029 130 2 2,517 1,368 181 13 Department of Defence .... AEG ...... Other . ... Total .......... 435 888 1,468 2,387 4,079 p * Estimate. p ** Minus expenditure for aircraft and related equipment. Sources: Statistical Abstract of the United States, 1967, p. 548; 1971, p. 520. million dollars. The repeated landings of US astronauts on the Moon have demonstrated its success (the last Apollo moonflight took place in December 1972). p An important direction of NASA activity now is the development of the Skylab orbital laboratory, a reusable space shuttle transportation system, aeronautic research, notably, under the VTOL (vertical take off and landing) transport aircraft project, and a number of other projects relating to the exploration and practical uses of outer space. The overall US expenditure on space research, however, shows a decrease owing largely to a cut in the NASA budget resulting from the completion of the Apollo project. *** Notes

[134•1] The AEC develops nuclear reactors for rocket propulsion, compact on-board nuclear power plants for spaceships and satellites, on-board satellite instruments for detecting nuclear explosions in outer space, and other projects. [134•2] "The Budget of the United States Government, Fiscal Year 1974, p. 80. [135•1] Ibid., Fiscal Year 1966, p. 450. [135•2] Edison Electric Institute Bulletin, May 1967, pp. 195–98.

3. FOREIGN MILITARY ASSISTANCE

p Since the turn of the century the US imperialists have been using their "dollar diplomacy" to implement their economic and political schemes on the world scene. This specific brand of diplomacy boils down to an extensive use by the 137 Table 19 years 1964 1965 1067 1968 1969 1970 1971* 1972* 4,131 1 ,564 220 15 5,005 1,592 232 27 5,307 1,673 184 44 4,575 1,890 146 36 4,083 2,095 117 36 3,565 1,756 103 3,185 1,577 97 2,958 1,575 62 5,930 6,856 7,208 6,647 6,331 5,424 4,859 4,595 US monopolies of financial levers to attain their expansionist goals. In Latin America the dollar diplomacy went hand in hand with the notorious Monroe Doctrine, in the Far East and Asia it complemented the "open doors" policy, while in Canada it took the form of massive export of capital aimed at exploiting Canada’s fabulous natural wealth and subordinating her economy to the US interests. p After the First World War, when the USA became the financial centre of the capitalist world, its ruling circles stepped up their policy of dollar diplomacy. No longer satisfied with their operations in the peripheral areas of the capitalist world, until then the principal object of the expansionist drive of the young but rapidly developing US capital, they proceeded to use this diplomacy on a global scale. p The dollar diplomacy assumed an especially wide scope following the Second World War when the United States, having become the economic, financial and political centre of the capitalist world, sought to dictate its will to the world. Taking advantage of the post-war economic dislocation and instability in the West European countries the US imperialists began to interfere directly in their internal affairs under the guise of aid and strengthening the defences of the "free world" against the "communist menace”.

138 p In the post-war period, the US imperialists implemented several foreign aid plans, including the Marshall Plan, "technical aid" under Point 4 of the Truman Doctrine, and the Military Assistance Programme (approved by the US Congress in 1949). In 1952 the different programmes of economic, technical and military aid were brought together and all foreign aid began to be governed by the Mutual Security Act which was later replaced by the Foreign Assistance Act of 1961. p The US renders foreign countries varied “assistance”, including military, economic and technical. All foreign aid programmes serve the strategic, military, political and economic interests of US imperialism. The bulk of this “aid” goes to finance, directly or otherwise, the military and military-economic measures carried out by countries which follow in the wake of US foreign policy. p By its military foreign assistance programme the USA directly contributes to the military development of its allies by supplying military equipment (often obsolete), and extending them help in training their military personnel and in military construction, and by financing military purchases by its allies in the United States and other allied countries. US military assistance enabled many of the US allies to reequip their armies almost completely with American-made weapons and materiel. p The USA trains foreign military personnel on a wide scale. For instance, in 1961 over 5,300 foreign military trainees attended Army courses in the United States and another 3,375 received training in US Army centres overseas under the military foreign assistance programme. [138•1 In addition, US military instructors train a large number of foreign servicemen in their own countries. Other forms of US military aid to its allies include joint development and production of military equipment, construction of a variety of military facilities and installations, etc. p US foreign aid is used not only for direct but.also for indirect military financing, since the US Government provides it on terms that compel the recipient countries to maintain 139 large armed forces and spend for military purposes considerable sums out of their own funds. Between July 1945 and June 30, 1971 the USA gave foreign countries a total of 150,000 million dollars’ worth of assistance, of which military aid accounted for 42,000 million dollars and economic and other assistance, for 108,000 million. p The last ten years have seen drastic changes in the geography of US foreign aid. In the early post-war years most of it went to Western Europe, later to the developing countries of Asia, the Middle East and Latin America. At present, about 80 per cent of all US economic aid goes to only twenty countries, and military assistance to just a few. The West European states, with the exception of Spain, do not receive US economic aid at all and only some of them get small military aid diminishing in size and share. Between 1945 and 1957, the share of Western Europe in the total US military aid was 56.4 per cent; in 1959/60, 34.6 per cent; in 1963/64 a mere 19.1 per cent. [139•1 The US ruling circles consider that the West European countries have regained their economic strength

to be able to finance their military activity out of their own funds. Accordingly the USA has withheld its subsidies and supplies under its military aid programme, now limited to fulfilling its commitments to NATO and to training its military personnel. p In 1966/67 military aid to South Vietnam was transferred from the military foreign assistance programme into the Defence Department budget. In 1967/68, the same was done with regard to military aid to Thailand. Military foreign assistance for 1971/72 was officially slated to total 1,025 million dollars, i.e., 294 million more than in 1969/70, but, adding military aid to South Vietnam, the figure must be much more. The latest tendency towards increasing US foreign aid is linked with the Nixon Doctrine, one of whose main objectives is to make the US partners receiving American aid increase their military expenditures and get them to act in the interests of the US imperialists. p The survey carried out by the US Congress revealed that the actual volume of foreign military “aid” is several times 140 larger than officially stated by the government. According to Congressional data, for example, the actual sum of this aid was about 4,000 million dollars in fiscal 1971 and along with arms sales, about 7,000 million dollars. p By extending “assistance” and playing on the common class interests of the capitalists in all countries and their fear of the growing world socialist system, the US ruling circles have succeeded in knocking together several aggressive military blocs and concluded many bilateral military-political agreements spearheaded against the Soviet Union and other socialist countries. The USA has obtained from its allies permission to set up its military bases and station its forces in their territories, and is pressuring them to maintain large armies, rearm themselves intensively and follow in the wake of the US imperialist policy. p By providing assistance, the United States secures new market outlets for American goods, new sources of raw materials and spheres of lucrative investment for US business interests. What is more, about 80 per cent of US foreign aid funds is spent within the United States anyway, which creates additional business opportunities for US monopolies. In this fashion, foreign aid provided at the expense of the American taxpayer secures for US corporations new sources of profit. p Part of US foreign aid takes the form of loans. According to Dr. D. A. Fitzgerald, former Deputy Director of the International Co-operation Administration, 24.5 per cent of the assistance provided between July 1, 1945 and June 30, 1963 was in the form of loans [140•1 whose share in recent years has increased to over 60 per cent. p All this goes to show that US foreign aid is a highly profitable business for the USA and a great danger to its recipients. p US government publications claim that foreign aid is of crucial importance for the security of the USA and the "free world”, furthering US national interests. The New York Times wrote that this aid goes primarily to countries bordering the socialist states and offering over 2 million men under 141 arms prepared for an emergency. Without this aid

US military spending would have to be much greater to secure an equivalent contribution to the “defence” of the "free world”. The upkeep of a comparable number of American soldiers would cost the USA ten times more than its current military foreign aid, [141•1 the newspaper said. The USA annually spends an average of over 5,000 dollars per serviceman, while Asian countries spend only 200–750 dollars. In 1963/64 the United States gave a total of 822,800,000 dollars’ worth of military aid to the Philippines, Thailand, South Korea, South Vietnam and the Taiwan regime which had altogether 1,923,400 officers and men in active service. According to American estimates it would have taken 7,583,500,000 dollars to keep an equal US troop strength there. The US ruling quarters regard foreign aid as a lucrative and effective investment in their ambitious military, economic and political programmes. The US Administration is taking steps to secure more privileged terms for its foreign aid to make it more effective as a tool of US interests, particularly in the military field. *** Notes [138•1] Army Information Digest, April 1962, p. 40. [139•1] Statistical Abstract of the United States, 1965, p. 863. [140•1] U.S. News and World Report, February 25, 1963, p. 48. [141•1] The New York Times, November 9, 1963.

4. THE STRUCTURE OF GENERAL DIRECT MILITARY OUTLAYS

The expenditures of the Defence Department, the AEG, NASA and outlays on strategic stockpiles, taken together, reflect faithfully on the whole the overall size, trends and structure of US direct military spending. In the present context it also includes AEG and NASA civilian outlays. This seems a fair approach, first, because AEG and NASA civilian outlays are small in relation to the total military spending and, second, because their size and share in the overall AEG and NASA spending cannot be estimated accurately. Third, they must roughly correspond to the numerous “invisible” military expenditures listed under the “ civilian” items of the federal budget. 142 Table 20 US Direct Military Outlays (million dollars; per cent) Fiscal ye ars 1951 1953 1955 1957 I960 1964 1965 Department of Defence ..... 19 765 43 610 35 531 38 435 41 215 49 760 46 173 Military assistance ....... 991 3 954 2 292 2 ’352 1 609 1 485 1 229 AEG 897 1 791 1 857 1 990 2 623 2 765 2 625 Strategic stockpiles and other . . 818 1,087 1,015 590 244 172 136 Total .............. 22,471 50,442 40 695 43 367 45 691 54 182 50 163 NASA ............. 60 80 74 76 401 4 171 5 093 Total 22 531 50 522 40 769 43 443 46 092 ’ 58 353 55 256 Department of Defence ..... Military assistance ....... AEC .............. 87.7 4.4 4 0 86.3 7.8 3 5 87.2 5.5 4 6 88.4 5.4 4 6 89.4 3.5 5 7 85.5 2.5 4 6 83.6 2.2 4 8 Strategic stockpiles and other . . 3.6 2.2 2.5 1.4 0.5 0.3 0.2 Total . . 99 7 99 8 99 8 99 8 99 1 92 9 90 8 NASA 0 3 0 2 0 2 0 2 0 9 7 1 9 2 Total .... . ... 100 100 100 100 100 100 100 z D o o z o Fiscal years 143 Item of expenditure 1966 1967 1968 1969 1970 1971 1972 1973* 1974» Department of Defence 54 409 67,466 77 373 77 877 77 150 74 546 75 151 74 200 78 200 Military assistance ........ 968 873 654 789 731 999 806 600 800 AEC ........ 2,403 2,264 2,466 2,450 2 453 2,275 2,392 2 194 2,374 Strategic stockpiles and other . . . —62 —508 24 116 39 —169 —13 —559 —299 Total .... 57,718 70 095 80 517 81 232 80 295 77 661 78 336 76 435 81 074 NASA 5 933 5 423 4 721 4 247 3 749 3 381 3 422 3 061 3 135 Total 63 651 75 518 85 238 85 479 84 044 81 042 81

758 79 496 84 209 Department of Defence ..... 85.4 89 3 90 9 91.1 91.8 92 0 91.9 93.2 92.9 Military assistance 1.6 1 2 0 8 0 9 0 9 1 2 1 0 0.8 1 0 AEC ............... 3.8 3.0 2.9 2.9 2.9 2.8 2.9 2 8 2.8 Strategic stockpiles and other . . . —0.1 —0.7 0.1 0.1 -0.2 —0.7 -0.4 Total . 90.7 92.8 94.5 95.0 95.5 95.8 95.8 96.1 96.3 NASA 9.3 7.2 5.5 5.0 4.5 4.2 4.2 3.9 3.7 Total .............. 100 100 100 100 100 100 100 100 100 c z a p * Estimate. p Sources: Statistical Abstract of the United States, 1957, p. 238; 1963, p. 256; 1965, p. 254; The Budget of the United States Government, Fiscal Year 1968, pp. 456–57; Fiscal Year 1971, p. 82; Fiscal Year 1974, pp. 364–65. 144 p Substantial changes have been taking place in the structure of the US total military outlays (see Table 20). The war in Vietnam increased the share of the Defence Department and reduced that of the AEG, NASA and military aid. Such items as the maintenance of military personnel, procurement of military equipment, the costs of its maintenance and operation have moved to the top of the Defence Department spending list, the share of outlays on R&D and military construction has been reduced. p A large share of US military appropriations goes to buy armaments and finance R&D and NASA. While expenditure on arms procurement increases military power through stockpiling weapons and materiel, spending on R&D and space exploration is designed to augment military potential by developing novel and improving existing weapons systems. Now that the USA has built up massive weapons stockpiles, intensive work is under way to develop novel types of armament and gain a relatively greater military advantage than that given by weapons stockpiling. Therefore, before the US escalation in Vietnam spending on R&D grew at a faster rate than that on arms procurement. p In 1957/58 expenditure on R&D was 18 per cent in relation to that on military procurement, whereas in 1964/65 it reached 52.7 per cent. In recent years, the proportion has declined to one-third. p Military procurement and R&D expenditure is crucial for military power, since it largely determines the standards of armed forces equipment. p The switch from the strategy of "massive nuclear retaliation" to one of "flexible response”, and later the Vietnam war stimulated an appreciable increase in the share of expenditure on conventional armaments and hence on the ground forces in the overall US military outlays. The new strategy of "realistic containment" is likely to reduce the share of the Army and increase that of the Air Force and the Navy in the Pentagon’s overall expenditures. p The table below illustrates the structure of the Defence Department spending on the three armed services and various defence agencies.

p Changes in a country’s military strategy and policy and the advance of its armaments are reflected in the volume and 145 Fiscal years 1964 1068 1970 1971 1972« 1973* Department of the Army Department of the Navy Department of the Air Force Defence agencies and other 12.0 14.5 20.5 2.5 25.2 22.1 25.7 4.2 24.7 22.5 24.9 5.0 23.1 22.1 23.8 6.6 22.1 22.1 23.7 7.9 20.7 22.3 22.6 10.9 Total .......... 49.5 77.2 77.1 75.6 75.8 76.5 p * Estimate. Sources: Space Daily, February 1971, p. 136; Armed Forces Journal, March 1972, pp. 30–31. structure of military expenditures. An analysis of the latter gives an idea of the military development tendencies of a country and of its strategic plans for the future. This particularly applies to the United States.

CHAPTER V MILITARISATION OF THE US ECONOMY 1. THE EXTENT OF MILITARISATION OF THE ECONOMY

p After the Second World War, the USA, in pursuance of its aggressive aims, used the advances in military technology to expand the production of modern weapons of war to a scale unprecedented for peacetime, building arms factories for manufacturing a particular range of goods. In contrast to the past, they account for a large share of the total value of goods consumed by the military machine. The arms industry has become an organic component of the US economy. A sizable share of manufactured goods and services is regularly used for military purposes. This fact is universally known and is admitted even by high-ranking US statesmen and generals. p War production implies the manufacture of goods for military uses. -A vast range of goods is needed to prepare and wage wars. The range of goods used for the material support of the armed forces covers about 4 million items. The rapid progress of military technology and the invention of novel means of warfare entail constant changes in the range of goods for military uses. The historical tendency towards an increase in their numbers is slightly offset by the withdrawal from service of obsolescent military equipment, as well as by measures the Pentagon takes to standardise and narrow the range of supply items and adjust the system of military procurement. p According to their use-value the numerous goods manufactured for military purposes fall into two large groups: (1) goods for exclusive military use; (2) goods for military use largely similar to civilian goods. 147 p Historically these two groups have always been in imbalance, the ratio changing drastically under the impact of advances in military technology. Until the early 20th century, goods of the second group met most of the armed forces requirements. For a long time, manpower and animals were the two basic components of armed forces, foodstuffs and forage being their main items of consumption. The relatively small

demand for specific military goods was met mainly by government arsenals, so their production accounted for an insignificant share in the country’s total. The military sector of the economy in its modern sense was non-existent. The USA first embarked on a mass-scale manufacture of specific goods for military uses in the First World War. Government arsenals produced a small share of them, the bulk of war contracts going to private industries. Armsmanufacturing companies sprang up in the private sector of the economy for the first time ever. War production, which was at a low ebb in the twenties and thirties, skyrocketed in the Second World War. p Indices of the size and structure of the arms industry as a whole will not be found in US statistical publications or in the standard official classification of industries. The reason is not only the concealment by the nation’s rulers of the true scale of war consumption but also the specific character of war production. The fact is that almost all industries and a host of research and other institutions are involved in the production of a vast range of goods for war and in supply of varied services to the armed forces. Not infrequently, many companies of different industries share as subcontractors in the manufacture of sophisticated weapons systems incorporating thousands of parts. Therefore, it is wellnigh impossible practically to size up the general scope of war production and the extent to which the entire economy is militarised, scanning information on individual industries or on the output of individual goods for war. p Therefore, the method for assessing the degree of militarisation of the economy by correlating a nation’s total military spending with its gross national product (see Table 21) may be accepted as workable here. p Since data on military spending are borrowed from NATO statistics using a uniform standard method to show the 148 Table 21 Military Expenditures of NATO Countries as a Percentage of GNP Country I960 1955 1957 i960 1963 1965 1967 1969 1970 USA ......... 5 4 11.1 10.9 9 9 9 8 8 0 9 5 8 7 7 8 Britain . . ... 7 3 9 4 8 1 7 3 7 0 fi 3 5 7 5 0 l\ 9 France ......... 6.5 7.6 8 7 7 fi fi 9 5 fi 5 0 4 4 4 0 Canada ........ 3.1 7.6 fi 5 5 ?, 4 fi 3 ? ? 8 ? 4 ?. 5 Greece ......... 7.5 6.2 6 0 5 9 4 7 4 3 4 9 5 1 4 9 Turkey ........ 6 4 5.6 4 5 5 5 5 8 4 3 4 4 4 ? 3 7 FRG* ......... 5 2 4 8 4 8 4 7 fi 1 4 4 4 3 3 fi 3 3 Netherlands ...... 5 4 6 2 5 7 4 4 4 9 4 3 3 8 3 fi 3 fi Italy ....... 4.6 4.5 4 3 4 0 4 > ? 9 3 1 ? 7 ?, 8 Portugal ..... 4 1 4 7 4 5 4 7 1 8 5 8 7 "> fi 7 fi fi Norway ..... 2.6 4 4 4 0 3 fi 4 1 3 9 3 5 3 fi 2 9 Belgium . ... 2 4 4 1 3 9 3 7 3 fi ? 9 fl 9 3 0 ?, 8 Denmark ..... 1 8 3 6 3 5 3 1 3 4 ? fi ?, 7 ?, fi 2 3 Luxembourg ...... 1 5 3 6 2.2 1 1 1 4 1 4 1 ?, 0 9 0 9 p * Before its admission to NATO (in 1955) the FRG had met the occupational expenses of some countries and made a number of other payments listed as military spending in NATO statistics. Sources: The Review of Economics and Statistics, November 1967, p. 528; The Military Balance, 1968–1969, London, 1968, p. 55; ibid., 1971–1972, London, 1972, p. 60. military expenditures of all countries, they can be used to compare the extent of militarisation of individual capitalist economies. Moreover, the table gives an authentic

overall picture of trends in militarisation of the economy. Its data, however, misrepresent the actual relative level of military consumption, first, because many types of military spending are listed under civilian items of the budget to conceal the true scale of military development, second, because wrong methods are used to calculate gross national product, with much repeated counting and hence a notable overstatement of the total. p With requisite corrections in the calculation of military expenditures and gross national product, the percentage thereby obtained will indicate more or less accurately the extent of a country’s militarisation. By our estimates, the 149 US direct military expenditures (by the Defence Department, AEG, NASA, and on military aid) in 1969/70 totalled 84,000 million dollars. According to official statistics, the 1969 gross national product was worth 929,000 million dollars. Presuming that repeated counting overstated the US gross national product roughly by 20 per cent, the actual GNP in that year totalled 743,000 million dollars. In this case, the share of US direct military spending in GNP in 1969 was 13 per cent rather than 8.7 per cent as indicated in Table 21. p The extent of militarisation of the economy can also be assessed by correlating the strength of personnel employed in all the fields of military activity with the country’s total employment. Richard P. Oliver of the US Department of Labour Bureau of Labour Statistics used an inter-industry balance model to assess the impact of Department of Defence expenditures on employment. Oliver’s estimates are presented in Table 22, showing that the total of persons serving in the armed forces (including civilians) and employed in war production increased from 5.7 million in 1964/65 to 7.4 million in 1966/67. In 1964/65, military employment accounted for 8.6 per cent of the nation’s total, whereas the figure for 1966/67 was 10.3 per cent. Over the period, the share of military employment in the private sector grew from 3.9 to 5.2 per cent. Oliver’s assessment of the impact of the Vietnam war on employment rates in the USA is of definite interest. According to his estimates, the war has created 1.8 million jobs, which account for 24.4 per cent of the total employment increase in the country. In connection with ending the war in Vietnam the total and relative employment in the United States has somewhat reduced. The USA ranks first not only in the overall volume of military work but also in the extent of militarisation of the economy. Before the Second World War, it spent, as a rule, less than one per cent of its GNP for ’military purposes in peacetime, whereas today it spends more than 10 per cent. Since the late fifties, a certain downward trend in the share of military spending in GNP was in evidence in the USA, because its economy grew faster than its military spending. The escalation of the Vietnam war, however, stepped up the rates of militarisation of the US economy. 150 Estimated Employment Attributable Expend! Source: Monthly Labor Review, Washington, September 1967, p. 10. Category of employment 1964/65 Total employment, thous. Military employment thous. % Federal government .... 5,067 2,716 2,351 7,462 54,483 3,635.4 2,716.0 919.4 12.6

2,101.2 72.0 100.0 39.1 0.2 3.9 State and municipal admi– Private industries .... Total .......... 67,012 5,749.2 8.6 p The enormous militarisation of the US economy is mainly the product of huge investments in the military machine. Another factor is government military contracts as a bonanza for continued enrichment of the financial oligarchy and a means of statemonopoly regulation of capitalist reproduction and mitigation of its antagonistic contradictions. In fact, the Administration uses war preparations to carry into effect most of its measures involved in state-monopoly policy. Still another factor contributing to the militarisation of the economy is the manufacture by the USA of armaments not only for its own armed forces but also for its allies, as well as for boosting exports. The USA has become a veritable arsenal for all reactionary and aggressive forces of modern capitalism. "It is the world’s biggest arms dealer, supplying arms to its allies, to enemies in conflict with each other. In the period 1945–70, the capitalist countries exported 66,000 million dollars’ worth of arms, in which the US share was almost 50,000 million. [150•1 151 Table 22 to Department of Defence tures 1966/07 Employment involved directly or indirectly in Vietnam war in 1966/67 Military employment rnent, thous. thous. % thous. % to military employment % to total employment 6,016 4,437.5 73.8 798.8 18.0 13.3 3,350 3,350.0 100.0 634.0 18.9 18.9 2,666 1,087.5 40.8 164.8 15.2 6.2 8,569 19.3 0.2 6.0 31.1 0.1 57,670 2,971.5 5.2 1,008.8 33.9 1.7 72,255 7,428.3 10.3 1,813.6 24.4 2.5 p Arms exports are used by the US imperialists to increase the dependence of the capitalist countries on the USA in the military field, to secure fat war contracts for US corporations, to reduce the US negative balance of payments, etc. To promote arms exports, the Administration has increased credits for arms manufacture, through the Export-Import Bank in particular. At the request of the Department of Defence, from 1963 to 1967 this bank gave 2,600 million dollars in foreign loans for arms purchases in the USA. In 1964, the US Congress authorised the Department of Defence to issue guarantees to private banks on credits granted to corporations for arms exports. The procedure of issuing arms export licences has been simplified (arms exports are subject to government control, so private firms need a federal licence). p All this contributed to a large growth of US arms exports. In the period from 1961/62 to 1965/66, the Pentagon sold 11,100 million dollars’ worth of arms, of which 90 per cent went to NATO partners, Japan and Australia and 10 per cent to the developing countries. The annual rate of 152 purchases of US arms by the developing countries increased 13 times from 34 million dollars in 1961/62 to 444 million in 1965/66. [152•1 p According to Henry J. Kuss, Jr., Assistant Secretary of Defence, during 1962–65 arms sales yielded almost 1,000 million dollars in profits for arms-manufacturing firms and 1.2 million man-years of employment spread throughout the country. [152•2 Arms exports consume some 5 per cent of the Table 23 Biggest Arms-Exporting Firms Firm Export item Sales volume 1962–65, mil. dollars General Dynamics F-111A fighter-bombers ....

Tartar ground-to-air guided missiles ........... 1,072.0 34.4 Lockheed Aircraft Starfighter F104 fighter– bombers ............ 527.1 Hercules C-130 transports . . Orione R-3A antisubmarine aircraft ........... 409.3 23.5 McDonnel Aircraft F-4 fighter planes ...... 703.0 Bath Iron Works/ Defoe Shipbuilding Anti-aircraft guided missile destroyers .......... 277.0 Martin-Marietta Pershing ground-to-ground missiles ........... 253.0 Raytheon Hawk ground-to-air guided missiles ........... 231.8 Food Machinery and Chemical M-113 armoured personnel carriers ........... 166.8 Chrysler Sperry Rand Ling-Temco-Vought General Motors Boeing Airplane Tanks. M60AI 105-mm guns Sergeant guided missiles . . . Crusader F-8E fighter planes M-109 155-mm howitzers . . . C-135F aircraft ........ 154.2 149.7 66.0 56.5 53.0 Pacific Car & Foundry M-107 175-mm guns ..... 38.7 Grumman Aircraft S-2E anti-submarine aircraft 23.3 Source: Technology Week, October 3, 1966, p. 10. 153 total output of the US military industry. The bulk of these exports consists of aircraft, missile and space equipment. The biggest arms dealers are General Dynamics and Lockheed Aircraft. In the period 1962–65, they exported over 2,000 million dollars’ worth of weapons systems and military equipment (see Table 23). p Its technological superiority and huge war production enable the USA to sell arms at prices 30–40 per cent below those offered by other arms-exporting countries. This secures US domination of foreign arms markets. Occasionally, even the governments of industrialised capitalist countries prefer to buy arms from the USA rather than develop and produce new sophisticated weapons at home. A case in point is the British Government’s decision to buy in the USA F-4 and Phantom-2 jet fighters and C-130 turboprop transport planes rather than continue to support costly lagging development programmes in the United Kingdom. [153•1 The production of military equipment for its own armed forces and for export has assumed immense proportions in the USA and has become a permanent element of the structure of its economy. According to US press reports, US arms exports will scoop up 15,000–20,000 million dollars in the period 1966–75. *** Notes [150•1] Business Week, May 23, 1970, p. 114. [152•1] Progressive, November 1967, p. 30. [152•2] Ibid., p. 32. [153•1] Aviation Week and Space Technology No. 27, 1965, p. 19.

2. THE STRUCTURE OF MILITARY PRODUCTION AND THE DEGREE OF MILITARISATION OF INDIVIDUAL INDUSTRIES

p In addition to information on the militarisation of the entire economy, highly important is the study of the structure of military production and the degree to which individual US industries have been militarised. p The structure of military production is thrown into relief by the pattern of military expenditures of the government, which is the sole user of military equipment (excluding arms exports). For this purpose, all military expenditures are first divided into two groups: (1) pay to servicemen, veterans benefits, and pay to civilian personnel; (2) purchases of equipment, spare parts and other materiel, defence 154 construction, research and development, operating costs, etc. The first group accounts for approximately 40 per cent of the Defence Department expenditures, the second, for 60 per cent. In the first group, money is paid directly to persons within the above-listed categories, who spend it at their own discretion. It may be presumed that it is spent in general for the same purposes and in the same proportions as the earned income of other population groups. Consequently, the influence of this part of military consumption on the structure of the US economy is on the whole comparable to that of private consumption in general. In contrast, military expenditures in the second group are involved in the material equipment of the armed forces. The volume of this spending, i.e., purchases of goods and services by the Department of Defence, is illustrated by the following table. Fiscal year Military expenditures, tbous. mil. dollars Fiscal year Military expenditures, thous. mil. dollars 1951 31.6 1961 25.6 1952 42.8 1962 29.3 1953 31.2 1963 29.4 1954 12.9 1964 28.8 1955 16.0 1965 28.0 1956 19.2 1966 38.2 1957 21.0 1967 44.6 1958 23.7 1968 43.8 1959 24.6 1969 42.0 1960 23.7 1970 36.0 p Sources: William L. Baldwin, The Structure of the Defense Market, 1955–1964, Durham, 1967, p. 6; Statistical Abstract of the United States, 1966, p. 253; ibid., 1968, p. 249; 1971, p. 246.

p Under the impact of rapid progress in military technology and changes in policy and military strategy, frequent and marked changes occur in the volume and structure of government demand for military equipment. Hence the changes in the degree of militarisation of the economy and in the scale and structure of war production. Changes in government demand for military equipment affect most those industries 155 Table 24 Estimated Department of Defence Expenditures (1958 producers’ prices*) Branch of economy 1964/65 1966/67 Increment (+) or curtailment (—) in 1964/65– 1966/67, per cent mil. dollars per cent mil. dollars per cent Agriculture, forestry and fisheries ..... 2.6 16.6 248.2 18,840.7 2,052.7 520.6 149.9 61.0 954.7 84.7 87.7 87.5 310.7 314.7 3,449.3 218.6 401 6,945.5 969.8 354.2 0.6 47.1 5.1 1.3 0.4 0.2 2.4 0.2 0.2 0.2 0.8 0.8 8.6 0.5 1.0 17.4 2.4 0.9 3.1 21.6 275.2 29,265.6 4,200.4 877.2 488.7 368.2 1,306.4 99.0 124.6 226.7 457.5 562.7 4,257.8 236.6 867.9 9,655.7 906.0 523.5 0.5 53.8 7.7 1.6 0.9 0.7 2.4 0.2 0.2 0.4 0.8 1.0 7.8 0.4 1.6 17.8 1.7 1.0 +19.2 +30.1 -MO. 9 +55.3 -M04.6 +68.5 +226.0 +503.6 +36.8 + 16.9 +42.1 +159.1 +47.2 + 78.8 +23.4 +8.2 +116.4 +39.0 —6.6 +47.8 Mining ........ Construction ...... Manufacturing ..... Ordnance and accessories .... Food and kindred products ....... Apparel ....... Drugs, cleaning and toilet preparations . Petroleum refining and related industries . . Primary iron and steel manufacturing . . . Primary nonferrous metals manufacturing Metalworking machinery and equipment . . Office, computing and accounting machines Electric industrial equipment and apparatus Radio, television and communication equipment .... Electronic components and accessories . . Motor vehicles and equipment .... Aircraft and parts . . Other transportation Scientific and controlling instruments . . 156 (continued from page 155) Branch of economy 1964/65 1966/67 Increment (+) or curtailment (-) in 1864/65– 1966/67 . per cent mil. dollars per cent mil. dollars per cent Services ........ 4,287.4 1,499.2 561.0 15,107.1 1,494.0 20.9 10.7 3.7 1.4 37.8 3.7 0.1 5,643.0 2,371.2 540.2 17,121.0 2,019.2 24.2 10.4 4.4 1.0 31.5 3.7 0.1 +31.6 +58.2 —3.7 +13.3 +35.2 +15.8 Transportation and warehousing .... Medical, educational services and nonprofit organisations . . . Government enterprises Imports ........ Stationery, business trips, etc ......... Total . . 40,017.5 100.0 54,372.0 100.0 +35.9 * Excluding transportation and distribution costs. Source: Monthly Labor Review, September 1967, p. 15. which produce it in quantity. As illustrated by Table 24, more than a half of goods and services consumed by the military machine are supplied by the manufacturing industries: aircraft, missiles, radioelectronic equipment, ships, ordnance, ammunition, combat vehicles, transportation equipment, petroleum products, etc. In this table, the arms production of all government factories, i.e., arsenals, ship-building yards, etc., is listed under the item "Government Enterprises" excluding corresponding private industries, such as ordnance and small arms factories, shipyards, etc. p Almost all branches of the economy are involved, directly or indirectly, in the manufacture of military equipment. Direct involvement is expressed in the production of military end-products, i.e., goods which directly meet the demand of the armed forces. Their production, however, requires corresponding materials and implements supplied by other industries taking thereby an indirect part in military production.

157 p The varied contributions of individual industries to this production are illustrated by an inter-industry balance sheet showing the extensive commercial relationships between them and making possible an estimate of goods quantities to be produced by different industries per unit end-product of military denomination. p In the US inter-industry balance sheet for 1958, military end-products are listed under total government consumption; therefore, its data shed no light on the share of individual industries in the manufacture of military end-products, nor do they illustrate the degree of their militarisation. US economists introduced certain corrections into the indices of the inter-industry balance sheet for 1958 to ascertain the degree of involvement of individual industries in the manufacture of military equipment. For example, the US economist Clopper Almon isolated military consumption from total government consumption to determine the inter-industry structure of military end-products in 1958 and 1963, and produced forecasts for 1980. [157•1 As noted above, Richard P. Oliver also used data of the inter-industry balance sheet for 1958 to demonstrate the influence of Defence Department expenditures on the US economy. [157•2 p First, he analysed the volume and structure of Department of Defence spending expressing it in terms of prices of 1958. He listed under military expenditures only the Department of Defence spending and military aid, classifying them according to the three military departments and the basic budget items to illustrate the actual purchases of goods and services. Then purchases were distributed between industries under the standard industrial classification. Oliver also made certain amendments in the method of interindustry distribution of military purchases used in drawing up the US interindustry balance sheet for 1958. For example, in compiling the outlay-output table of the balance sheet for 1958, spending on research and development was excluded from the industries actually involved and transferred under the 158 specific item on R&D. In Oliver’s estimates, however, research and development spending of individual industries was left in the industries involved, whereas the R&D item indicated the outlays of only specialised research and development institutions. Further, veterans benefits and purchases of real estate and other property were excluded from the structure of military spending. p Second, data on purchases of goods and services were superimposed on an interindustry model to determine the direct and indirect expenditures of individual industries for the manufacture of military equipment. At the same time, in view of the changes in production processes since 1958, corresponding amendments were made in spending coefficients. The levels of military production thereby revealed were correlated with the total for each industry. p Third, calculated levels of military production were used as the basis for estimates of manpower directly involved in the manufacture of military end-products and supply of services and in the industries supplying implements and materials required for manufacturing military end-products. For greater accuracy, these employment estimates

were co– ordinated with employment indices from a Department of Defence report on prime military contractors. p The calculations carried out showed that every 1,000 million dollars of military purchases in the private sector maintained 82,000 jobs in 1965 and 73,000 in 1967. A reduction in this index was caused by rising prices and labour efficiency. Oliver’s estimates were meant primarily to show the impact on the US economy of the growth of military spending caused by the escalation of the Vietnam war. Oliver’s conjectural data on employment in the private military sector of the US economy are presented in abridged form in Table 25. They fail to indicate that proportion of employment in other countries which is attributable to US military purchases or employment of foreign labour. p The table shows great variations in the extent of militarisation of individual industries. Such branches of the economy (excluding those of plainly military nature) as the aircraft equipment industry, other industries producing transportation equipment (including shipbuilding), radioelectronics are militarised to the extreme. The table contains no data on 159 the atomic industry, 70 per cent of which caters to military needs, according to US press reports. p As Tables 24 and 25 illustrate, the US aggression in Vietnam boosted war production and changed its structure substantially. The share of conventional arms, apparel, transportation equipment, drugs, cleaning and toilet preparations, etc. in the total war production notably grew. Simultaneously, the relative role of corresponding industries in total war production grew along with their further militarisation. Taking it by and large, Oliver’s estimates understate the extent of militarisation of individual industries because in sizing up the volume of military spending he ignored such important items as the outlays of the AEG, NASA, etc. The US economist Harry Magdoff introduced certain amendments into Oliver’s method of estimating military employment; in particular, he added a half of AEG spending and all of NASA’s to "those of the Department of Defence, with corresponding corrections in view of price rises. As a result, it was found that the US total military employment in 1969 was 8.3 million: 3.5 million in active service, 1.3 million civilian personnel and 3.5 million employed in the war industry. [159•1 p The leading place in US total military production is held by the aerospace industry manufacturing weapons delivery systems. According to data in Table 24, aircraft and parts account for 17.8 per cent of the Defence Department expenditure. The table fails to give data on the manufacture of missiles, since under the standard industrial classification accepted in the USA, aircraft and missiles are itemised under different industries and even different groups of industries (aircraft construction is listed under transportation equipment, and missiles, under ordnance and accessories, and armour). Adding missiles to aircraft, the share of the aerospace industry will be much greater in US total war production. p According to data of the US Aerospace Industries Association (whose corporate members are, as a rule, prime contractors for aircraft and missile manufacture and leading

subcontractors), the total value of marketed products of this industry in 1964 was 17,300 million dollars, in 1965—20,700 160 Table 25 £ Estimated Employment Attributable to Department of Defence Expenditures in US Private Industries 1964/65 1966/67 Employment attributable (dircctlv or indircctlv) to the Military employment Military employment Vietnam build-up in 1966/67 share of industry Branch of economy Total em ployment, thous. thous. % to total em ployment share of industry in military em– Total em ployment, thous. thous. % to total em ployment share of industry in military em– thous. % to total military employ– % to total em ployment in total em ployment attributable in in– ploy– in in– ploy– ment in in– to dustry ment. dustry ment. in in– dustry “Viet– % % dustry nam build– -up,% Total employment in private industries 54,483 2,101.2 3.9 100.0 56,670 2,971.5 5.2 100.0 1,008.8 33.9 1.7 100.0 Agriculture, forestry and fisheries . . . 5,034 48.5 1.0 2.3 4,075 75.0 1.8 2.5 32.8 43.7 0.8 3.2 Mining ....... 634 29.9 4 7 1.4 620 40.0 6.5 1 3 13.1 32.8 2.1 1.3 Iron ...... 28 1 6 5 7 0 1 29 2.2 7.6 0 1 0.8 36 4 2 8 0 1 Non-ferrous ore 53 3.8 7.2 0.2 56 5.6 10.0 0.2 2.0 35.7 3.6 0.2 Coal ...... 145 4.5 3.1 0.2 140 6.2 4.4 0.2 2.1 33.9 1.5 0.2 Oil and natural gas . . 291 16.4 5.6 0.8 276 20.9 7.6 0.7 6.4 30.6 2.3 0.6 Stone, clay, chem– H > Pi n o o 161 ical raw ma– g terials, mineral P fertilisers . . 117 3.6 3.1 0.2 119 5.1 4.3 0.2 1.8 35.3 1.5 0.2 =j Construction .... 3,119 60.0 1.9 2.8 3,277 67.9 2.1 2.3 5.0 7.4 0.2 0.5 » Manufacturing . . . 17,604 1,390.2 7.9 66.2 19,318 2,021.6 10.5 68.0 737.7 36.5 3.8 73.1 £ Ordnance and ac– c-3 cessories . . . 227 106.1 46.7 5.0 284 183.9 64.8 6.2 92.9 50.5 36.6 9.2 5 Food and kindred z products . . . 1,752 20.3 1.2 1.0 1,767 31.7 1.8 1.1 12.6 39.7 0.7 1.2 S Apparel ..... 1,395 16.1 1.2 0.8 1,457 46.5 3.2 1.6 30.8 66.2 2.1 3.1 H Drugs, cleaning a w and toilet prep– c arations . . . 218 3.2 1.5 0.2 241 10.2 4.2 0.3 7.4 72.5 3.1 0.7 £ Primary iron and n steel manufactur– o 2 ing ...... 934 55.2 5.9 2.6 943 82.8 8.8 2.8 30.3 36.6 3.2 3.0 o Petroleum refining S, and related indus– tries . . . 182 10.9 6.0 0.5 182 14.5 8.0 0.5 4.4 30.3 2.4 0.4 Metal-working ma– chinery and equipment ..... 293 24.0 8.2 1.1 342 38.3 11.2 1.3 16.5 43.1 4.8 1.6 General engineering equipment . . . 251 13.8 5.5 0.7 282 21.7 7.7 0.7 9.2 42.1 3.3 0.9 Office, computing and accounting machines .... 179 15.4 8.6 0.7 227 21.9 9.6 0.7 8.0 36.5 3.5 0.8 Electric industrial equipment and apparatus ..... 349 33.0 9.5 1.6 418 47.1 11.3 1.6 18.1 38.4 4.3 1.8 Radio, television and communica– ^ tion equipment . . 533 182.0 34.1 8.7 666 221.7 33.3 7.5 49.3 22.2 7.4 4.9 2 162 (continued from p. 161) ££ 1964/65 1966/67 Employment attributable (directly or indirectly) to the Military employment Military employment Vietnam build-up in 1966/67 share of in– dustry Branch of economy Total em ployBient, % to total em– share of industry in mil– Total em ploymerit % to total em– share of industry in mil– % to total military % to total em– in total em ployment thous. thous. ployment itary em– thous’. thous. ployment itary em– thous. employ– ployment attributable in in– ploy– in in– ploy– ment in in– to dustry ment, dustry ment, in in– dustry Viet– % % dustry nam build– -up,% Electronic compo– nents and accesso– ries ...... 280 71.5 25.5 3.4 379 99.0 26.1 3.3 31.1 31.4 8.2 3.1 Motor vehicles and equipment . . . 787 14.4 1.8 0.7 841 29.4 3.5 1.0 14.4 49.0 1.7 1.4 Aircraft and parts . 602 365.9 60.8 17.4 803 474.2 59.1 16.0 141.6 29.9 17.6 14.0 Other transportation equipment . . . 260 69.8 26.8 3.3 285 64.2 22.5 2.2 — — — — Scientific and con– trolling instruments 252 31.6 12.5 1.5 292 41.6 14.2 1.4 13.8 33.2 4.7 1.4 Services ...... 28,092 572.6 2.0 27.3 30,380 767 2.5 25.8 220.2 28.7 0.7 21.8 Business services, research and de– velopment . . . 1,778 92.1 5.2 4.4 1,970 126.5 6.4 4.3 35.7 28.2 1.8 3.5 c M > g r z o H pi pi n o

Source: Monthly Labor Review, September 1967, pp. 10–11. 163 million, in 1967— 27,300 million, in 1968—29,800 million, in 1969—26,900 million, in 1970—24,800 million and in 1971— 21,700 million. The total manpower employed in the aerospace industry in 1969 was 1,354 thousand, i.e., 19.5 per cent more than in 1965. [163•1 In the past few years the total output and employment in this industry have slightly fallen which is attributed mainly to the ending of the Vietnam war. p The US aerospace industry holds a leading place in military production and in the manufacturing industry as a whole. Suffice it to mention that for the number of operatives and office personnel and for its gross output, it is far ahead of the automotive industry. Its main products are aircraft, missile and space vehicles. The greater part of the output of the aerospace industry consists of aircraft. p Aerospace industry holds a leading place among other US industries also for the volume of research and development. In mid-1966, the aerospace industry employed 215,000 research scientists and engineers (who accounted for about 10 per cent of total employment in the industry), of whom 104,000 were concentrated at factories manufacturing aircraft and related equipment, 99,000 —at factories producing missile and space systems, and 12,000—at enterprises specialising in other hardware. [163•2 The aerospace industry accounts for approximately 30 per cent of the total engineering and technical personnel employed in US private industrial companies. p Roughly nine-tenths of the total aerospace output is consumed by the military machine, more than eight-tenths being purchased by the government and about one-tenth being exported. In 1960, the USA exported 1,726 million dollars’ worth of aircraft and missiles, in 1965—1,618 million, and in 1969—3,151 million. [163•3 p The US aerospace industry holds the dominating position in the capitalist world both in the volume and technological standards of output. The USA produces some four-fifths of the aircraft and missiles built in the capitalist world. 164 p The USA closely concentrates on the development of the aerospace industry. Its corporations are granted various privileges and government financial and other aid through various channels which secures for them high monopoly profits and stimulates production. p The US aerospace industry has immense productive capacities which are largely idle. Nevertheless, new capital investments are poured into this industry. It is kept in full readiness for mobilisation of its huge potential in an emergency. In May-July 1965, Wall Street Journal and other press organs in a series of articles assessed the preparedness of the US economy for waging a limited war. They said, in particular, that the aircraft industry had large potentialities for boosting aircraft production within a short period.

p The atomic industry is another leading branch of US military production. After the discovery of plutonium by the American physicist Glenn T. Seaborg in 1940, the USA went ahead with an atom bomb development project. An atomic pile was built in Chicago under the direction of the famous physicist Enrico Fermi. Its start-up in December 1942 marked the birth of the US atomic industry. p In the period 1943–44, the USA rushed the development of the atom bomb within the framework of the Manhattan Project. New atomic piles and other installations were built. The United States was given great assistance in building up the industrial facilities for manufacturing the atom bomb by Canada and Great Britain which supplied materials and research personnel. In July 1945, the USA carried out the first testing of the atom bomb in the district of Alamogordo, New Mexico, and in August atom bombs were dropped on the cities of Hiroshima and Nagasaki in Japan. p The US expenditures on the atomic industry totalled over 2,000 million dollars towards the end of 1946. In subsequent years, particularly after the successful testing of an atom bomb in the Soviet Union, the US imperialists continued to make large investments in the atomic industry. The assets of the Atomic Energy Commission as of June 30, 1969 were estimated at 9,454 million dollars. [164•1 The AEG has at its 165 disposal about 40 industrial enterprises, laboratories and testing grounds situated in 20 states of the USA and in Puerto Rico. p The Atomic Energy Commission was set up in 1946 as a monopoly government organisation for research into military and civil nuclear power engineering. In 1951, however, the AEG adopted a programme under which private firms were also invited to take part in nuclear power development. Twenty-five associations (incorporating 81 firms) were set up in the country to share in developing power reactors and producing nuclear weapons. The amendments made in 1954 in the Atomic Energy Act of 1946 led to a considerable increase in the number of private companies operating in the atomic industry. At present, private firms handle under AEG licences almost all operations involved in the production and use of nuclear materials except production of enriched uranium by the gas diffusion method, chemical processing of irradiated nuclear fuel and disposal of radioactive waste. These operations are the exclusive prerogative of the AEG and carried out at government enterprises. The AEG has also retained the functions of general direction and regulation of atomic industry development. p As is illustrated by Table 26 showing the AEG activities in the period 1955–70 the biggest items of the AEG budget are expenditures for the development and production of nuclear weapons, reactor construction, production of special nuclear materials and raw materials purchases. The AEG invests large sums in the development of reactors for spaceships. For example, in the period 1957–65, the AEG spent 900 million dollars under the Rover nuclear rocket programme handled jointly with NASA. [165•1 p The US Administration continues to spend large sums on the development, production and storage of nuclear weapons, on operations involved in underground nuclear tests, as well as on measures to maintain its preparedness for resuming nuclear weapons tests in

the atmosphere. Over the past few years, there has been a certain cutback in US expenditures for the purchase of uranium concentrate and the production of special nuclear materials, which have been stored in 166 US Atomic Energy Commission Summary of Financial Data* Fisca 1 years 1955 1957 I960 1963 1965 1967 1969 1970 Employment, thoiis ........ 112 6 119.5 122 7 135.3 133 9 130 1 127 2 122 4 Federal government . 6 1 6 9 6 9 7 1 7 3 7 5 7 5 Contractor operatincr 82 9 98 2 104 6 115 0 114 8 113 6 108 9 106 0 Contractor construction and design . . . 23 6 14 4 11 2 13 1 11 8 q o 10 8 8 9 Cost of operations, mil. dollars Procurement of raw materials Production of nuclear materials Weapons development and fabrication ......... 1,289.5 193.6 588.4 258.7 1,918.3 397.8 762.8 337.2 2,619.1 716.5 731.3 505.4 2,713.2 447.9 652.4 696 6 2,569.8 261.1 571.3 763 1 2,447 162 521 737 2,566 101 495 898 2,504 490 896 Development of nuclear reactors 114.6 255.7 399.3 507.3 235.9 528 508 496 H weapons development ana IBDrication ......... 258.’ . 114. f 337.2 5 255.7 505.4 399.3 696.6 507.3 763.1 235.9 737 528 898 508 896 o o 496 § Development of nuclear reactors 167 Physical research . . . 48.2 28.9 10.3 34.0 12.8 6,487.3 4,645.8 707.1 505.5 629.0 1,209.9 69.7 33.1 8.9 38.5 14.6 6,907.9 5,392.5 792.6 411.6 311.2 1,898.7 132.8 48.9 7.1 51.2 26.6 7,344.8 5,458.2 1,271.2 288.6 326.7 2,649.6 198.5 70.5 5.0 67.1 37.6 8,233.5 5,447.5 1,885.9 318.2 581.8 3,134.8 237.0 84.4 3.6 80.3 33.2 8,871.0 5,464.0 2,370.2 636.1 400.7 2,624.6 292 95 2 89 20 9,062.0 5,368.0 2,841.0 611 243 2,199.0 332 99 108 25 9,454 5,333 3,077 602 442 2,616 336 2 100 > a w > o 124 I T] H 11 n W 0 9,728 o o 5,407 § 3,170 596 555 2,222 Biology and medicine research Community operations . . . Administrative expenses . . . Miscellaneous expenses and income, mil. dollars .... Plant investments (excluding depreciation) year end, mil. dollars Research and development facilities ...... Other ......... Construction in progress . . . Appropriations received ..... p * Data are given in round numbers, therefore, the. sum of specific data may be discrepant with the total. Sources: U.S. Atomic Energy Commission, 1965, p. 409; Statistical Abstract of the United States ^ 1970, p. 529;.1971, p. 519. » 168 plenty. A part of productive capacities for manufacturing nuclear weapons have been laid off. p The radioelectronics industry belongs among the biggest branches of US military production. Its products are of exceedingly great importance for manufacturing modern sophisticated weapons systems. Over the past two decades, the share of military equipment and instruments in its total output has sharply grown. The government has become the biggest consumer of these products. Radioelectronic equipment supplied under government, mostly military, contracts, accounts for approximately a half of the total volume of marketed goods of this industry. p The expansion of US military production is accompanied by an increase in government demand for radioelectronic goods, which in turn stimulates the rapid development of the

radioelectronics industry. In 1970, this industry employed a labour force of 1,169,000. According to estimates by the Electronic Industries Association, 10,700 million dollars’ worth of goods was produced in 1960, 18,500 million in 1965, 24,300 million in 1970, and 25,300 million in 1971. [168•1 p According to the American press, the US radioelectronics industry has substantial idle capacities which provide the basis for a rapid increase in production whenever necessary. p The shipbuilding industry is yet another leading branch of military production. Over 60 per cent of its output is intended for the Navy. In the USA, ships are built both by government and private shipyards. In 1965, there were 950 private and 11 government shipbuilding yards in the USA. In 1969, private yards employed a labour force of 145,000, government yards, 92,000 (during the Second World War, the maximum labour force employed in private and Navy yards was 1,398,000 and 333,000 respectively). Private companies handle the bulk of shipbuilding. For example, in 1953–62, private and government shipbuilding yards accounted respectively for 54 and 46 per cent of all shipbuilding operations (new building, repairs, modernisation and overhauling of Navy ships in commission). In the period 1963–65, the share of private shipbuilding yards in these 169 operations grew to 08 per cent, while that of Navy yards dropped to 32. By the beginning of the 70s the share of private firms and general ship-building work had grown still more, amounting to over 70 per cent. It should also be stressed that since 1968 all government orders for new warships and other craft have been handled exclusively by private firms. The share of private companies in building Navy ships is in excess of fourfifths of the total cost of operations, while in repair and modernisation it is a little over onefourth of the total volume. [169•1 p The following causes are responsible for the upward tendency observed in the share of private companies in new construction. First, the cost of shipbuilding at private yards is from 8 to 32 per cent (depending on class of ship) lower than at government yards. Second, government contracts awarded to private shipbuilding companies are a major form of state-monopoly stimulation of the development of this industry and of its maintenance at a high level of mobilisation preparedness. p The government enterprises handle the overwhelming share of work in the repairing, modernising and re-equipping warships and other sea craft. The share of private enterprises in these operations amounts today to roughly onethird. p The highly advanced US shipbuilding industry manufactures the most sophisticated types of modern surface ships and submarines, auxiliary and transport vessels, meeting almost all of the Pentagon’s demand for new warships and transports. p Shipbuilding is characterised by great disproportions in the total structure of output. In the late fifties and early sixties, the average annual cost of all operations the industry carried out for the Department of Defence was about 2,000 million dollars, of which approximately 60 per cent was spent on new construction, 25 on repair and modernisation

and 15 on overhauling. [169•2 By the beginning of the 70s the total cost of these operations has reached over 3 thousand million dollars. 170 p In spite of its big military contracts the shipbuilding industry has large productive capacities chronically idle mostly due to a decline in the inflow of orders from shipping companies for merchant ships. Since the cost of shipbuilding at US yards is much higher than at foreign yards (mainly because of the relatively high prices of building materials and higher wages of American workers), US shipping companies tend to do business with foreign yards. In 1946, US private shipbuilding yards built 83 merchant ships with a total displacement of 645,700 gross register tons, whereas in 1960 they built 25 (389,200 tons) and in 1964, 16 (214,900 tons). p In 1964, private yards operated at 40–55 per cent of capacity, and 11 Navy yards, at 63 per cent. [170•1 The flow of military contracts associated with the escalation of the Vietnam war reanimated business on the shipbuilding market. However, the problem of chronically idle capacities at US shipbuilding yards remains unsolved. p To stimulate the development of the shipbuilding industry, modernise it and implement various mobilisation measures, the Administration, in addition to profitable war contracts, gives private shipbuilding companies subsidies and other assistance. For example, in 1966/67, Congress appropriated 132,200,000 dollars in subsidies to meet up to 55 per cent of merchant ship construction cost at US shipbuilding yards. p The manufacture of ordnance, small arms and ammunition also belongs among the main branches of modern military production. In 1963, the USA had in operation 112 ordnance and small arms factories and 75 ammunition factories. There was a large number of stand-by enterprises which periodically resumed production to maintain themselves in mobilisation preparedness. p The escalation of the US aggression in Vietnam resulted in a sharp increase in the Pentagon’s demand for ordnance, small arms, and ammunition. To meet these growing requirements, the Administration stepped up the production of these goods at operating enterprises and reactivated many laid-off factories. As a result, the manufacture of ordnance, 171 small arms and ammunition markedly grew. The Department of Defence expenditures for procuring ordnance and small arms grew from 400 million dollars in 1963/64 to 500 million in 1965/66. Over the same period, spending on ammunition increased more than 550 per cent, reaching 2,800 million dollars. In 1966/67, 3,600 million dollars was spent on ammunition procurement. [171•1 p Data presented in Tables 24 and 25 illustrate the considerable increase in the production of ordnance and small arms and in employment in this industry. As a matter of fact, this growth was still greater, because the above indices illustrate the activities only of private companies and contain no information on the manufacture of ordnance and small arms by government arsenals.

p The automotive, oil and chemical industries are also highly important for the US military-economic potential. At present, military equipment accounts for a relatively small share of their output, as well as of the country’s total military production. In an emergency, however, the absolute and relative volumes of military production in the above industries will grow. p The output of military and space equipment by the three biggest companies in the US automotive industry was worth about 850 million dollars in 1964, General Motors accounting for 426 million, Chrysler for 214 million and Ford Motor for 209 million. This industry manufactures a vast range of military goods, including combat vehicles, missile guidance systems, aircraft electronic computers, etc. p The industries manufacturing military end-products are closely linked with those supplying raw materials, fuel and other requisite goods. It is quite natural, therefore, that business activity in the leading arms industries has a direct bearing on the scope and level of militarisation of the related industries. p A report of the UN special commission of experts who studied the economic and social consequences of disarmament in the early sixties indicates the share of military consumption of oil and some other raw materials by all industrialised countries, including the USA (see Table 27). If, however, 172 Table 27 Direct and Indirect Mililary Demand for Selected Raw Materials (as Percentage of Their Total World Supply 1958 and 1959) Average for industrial countries United States 1958 1959 1958 1959 Petroleum ........ 8.9 3.0 15.7 12.0 9.8 9.4 8.3 7.1 5.3 2.7 2.3 8.3 2.9 14.7 9.5 9.3 9.4 6.8 6.6 4.9 2.6 2.2 4.5 1.5 7.8 6.0 4.9 4.7 4.2 3.5 2.6 1.3 1.1 4.1 1.4 7.4 4.8 4.7 4.7 3.4 3.3 2.5 1.3 1.1 Natural rubber ...... Nickel . . ........ Tin . ....... Zinc and lead ...... Molybdenum ....... Bauxites ....... Manganese ........ Chromium ...... Source: Congressional Record, January 29, 1963, p. 1264. the corresponding indices for the USA are compared with its own consumption rather than with the total for all industrialised countries, a still higher level of militarisation of the industries manufacturing the above types of raw materials will be revealed. p In the USA, the military industry accounts for 2-3 per cent of the national total steel consumption, more than 8 per cent of aluminium, about 33 per cent of nickel, approximately 85 per cent of titanium. In the past few years, synthetic materials and ceramics have been widely used in the armsmanufacturing processes. Metals and alloys, mostly steel, however, remain the main structural materials. In the early sixties, steel accounted in terms of weight for about 66 per cent of the total materials consumed by the aircraft industry; 70 per cent, by the missile industry, and 90 per cent, by the shipbuilding industry. Despite the contemplated reduction in the specific norms of metal consumption per unit cost of military products, the total consumption of almost all 173 Table 28 Projected Aggregate Consumption of Metals for Military Purposes (thous. tons) Item I960 1980* Carbon steel ..... 994 1 824 Special steel .......... 214 319 Stainless nickel steel 35 136 Copper and alloys . . . 07 108 Aluminium ........... 111 103 Nickel alloys . . 7 1 18

0 Magnium .... 3 2 7 1 Titanium .... 3 1 Hi 7 Load ..... 20 3 32 7 Cadmium ....... 0 9 1 4 Cobalt ........ 0 8 2 1 Chromium ...... 3 1 8 8 * Estimated average growth rate of military demand. Source: Hans II. Landsberg, Leonard L. Fishman, Joseph L. Fisher, Resources in America’s Future. Patterns of Requirements and Availabilities 1960–2000, Baltimore, 1963, pp. 717–20. metals used in arms production will grow in the immediate future (see Table 28). p Arms manufacture demands high-quality structural materials. Refractory metals (tungsten, molybdenum, niobium, tantalum) and novel light metals (titanium and beryllium) are of prime importance in the production of modern sophisticated weapons systems and space hardware. Discussing the prospects for militarisation of individual US industries, it should be noted that its level will be determined by the volume and structure of government military demand. *** TEXT SIZE

Notes [157•1] Clopper Almon, Jr., The American Economy to 1975. An Interindustry forecast, New York, Evanston, and London, I960. [157•2] Monthly Labor Review, September 19G7, pp. 9-16. [159•1] The American Economic Review, May 1970, p. 241. [163•1] Aerospace Facts and Figures 1970, pp. 8, 84; Interavia Air Letter, Geneva, July 9, 1971, p. 6. [163•2] Metals Review No. 5, 1966, p. 5. [163•3] Aerospace Facts and Figures 1970, p. 69. [164•1] Statistical Abstract of the United States, 1970, p. 529. [165•1] Nucleonics No. 3, March 1966, p. 22. [168•1] Electronic Market Data Book, 1971, pp. 1-2. [169•1] Congressional Record, May 5, 1965, pp. 9217, 9232, 9249.

[169•2] Ibid., p. 9232. [170•1] Congressional Record, May 5, 1905, p. 9249. [171•1] Business Week, February 10, 1968, p. 68.

3. DISTRIBUTION OF MILITARY PRODUCTION BY AREAS AND THE LEVEL OF MILITARISATION OF INDIVIDUAL AREAS

p US official statistics do not contain data on the distribution of military production by areas. Analysis of the geography of military industries in US publications is often based on 174 data on prime contracts awards contained in Department of Defence and NASA reports. They give only a general idea of their territorial distribution because, first, they report only prime military contracts, ignoring subcontracts at various levels whereby a part of operations stipulated in primary contracts are transferred to other states; second, these contracts are concluded, as a rule, for the supply of military end-products; therefore they only partially reflect the involvement of basic industries (supplying raw materials, stores and other goods required for the manufacture of military end-products—aircraft, missiles, warships, etc.) in war production; third, they disregard the output of military goods by government factories..However, we have to use these data Table 29 Distribution of DOD Prime Contracts by Areas (average annual percentage) Area 1939-4[ 1950–53 1960–62 (063–04 1967 1969 North East ........ New England ..... 32.5 8 9 33.2 8 1 30.5 10 6 26.5 9 5 26.8 10 4 27.5 10 3 Mid-Atlantic states . . Mid West ........ 23.6 37 9 25.1 34 3 19.9 18 5 17.0 20 3 16.4 23 3 17.2 20 3 North-East states . . . NorthWest states . . . South ....... 32.5 5.4 15 9 27.5 6.8 13 2 12.0 6.5 17 6 11.3 9.0 22 8 13.3 10.0 27 3 13.1 7.2 28 0 South- Atlantic states South-East states . . . South-West states . . . Far West ......... 7.1 2.8 6.0 13.3 6.8 1.7 4.7 18.5 9.6 1.7 6.3 32.1 13.1 2.4 6.7 30.4 12.5 2.8 12.0 22.6 12.7 3.4 11.9 24.2 Mountain states .... 1.1 12 2 0.6 17 9 4.7 27 4 4.3 26 1 2.3 20 3 3.6 21 6 Other .......... 0.4 0.8 1.3 Total .......... 100 100 100 100 100 100 Sources: R. E. Lapp, The Weapons Culture, New York, 1968, pp. 184–85; W. Isard, J. Ganshow, Awards of Prime Military Contracts by County, Stale and Metropolitan Area of the United States, Fiscal Year 1960; W. Isard, G. Karasaka, Unclassified Defense Contracts: Awards by County, State and Metropolitan Area of the United Stales, Fiscal Year 1962, Philadelphia, 1962, Fiscal Year 1964, Philadelphia, 1965. 175 for discussing the geographical patterns of the US arms industry as more accurate information is unavailable. p Since data for individual states are not typical of the distribution of arms production (states diifer in size of territory, population, level of development and economic

structure), larger territorial units—"census districts" (all states are grouped into 9 districts) or such major regions as the North East, Mid West, South, Far West (see Table 29)—are taken for comparison of the distribution of prime contracts of the US Department of Defence in different periods. p During the Second World War, military production tended to follow the overall geographical pattern of the country’s productive forces. The bulk of military contracts went to the North-East states (Michigan, Ohio, Illinois, and others) and the Mid-Atlantic states (New York, Pennsylvania and New Jersey). This coincidence in the distribution of military and industrial production is attributable to the fact that the manufacture of military goods, most of which were armoured vehicles, ordnance, small arms, ships and other conventional weapons, could at that time be organised at existing factories of corresponding industries geared to war production. p In the post-war period, the rapid advancement of weaponry was attended with substantial changes in the structure of military production: the share of aircraft, nuclear weapons, missiles, radioelectronic equipment sharply increased, whereas that of conventional armaments diminished. Changes in the structure of war production entailed great changes in its geographical distribution. A considerable part of arms production began to be concentrated in those districts which had highly developed aircraft, missile and radioelectronics industries, in particular, in such relatively new industrial states as California and Texas, as well as in the states of New York, Massachusetts, Connecticut, and others. p When examining the distribution of military production the eye is struck by the sharply increased importance of the Far West in the fifties and early sixties, which was due above all to the concentration in this area of the aircraft, missile and much of the radioelectronics industry. The tendency towards a notable increase in the role of the Pacific states and a lesser role of the old industrial districts was in evidence as far back as the early fifties, but this process was 176 somewhat offset by the considerable demand for conventional arms during the Korean war. After that war, the role of the Western states continued to grow rapidly. In the first half of the sixties, the Far West accounted for about one-third of the Department of Defence contracts, which was approximately 150 per cent higher than the area’s share in the total output of the country’s manufacturing industries. The share of the Far West was still greater in NASA contracts. For the total value of military contracts the states of the Far West were far ahead of such old military production areas as the North-East and Mid-Atlantic states. Among the Western states California was particularly prominent, accounting for over one-fifth of the value of Pentagon contracts and for almost a half of NASA’s. California left far behind such states as Michigan, Ohio, Illinois and New York that had been known as the leading arms manufacturers during the Second World War and the Korean war. In the post-war years, the share of the North East and Mid West m military contracts notably diminished. It is characteristic that the role of these areas in the country’s military production is much smaller than it is in industrial production as a whole.

The South accounted for approximately one-fifth of the total military output, which was slightly above its share in the country’s total industrial production. Thus, there were considerable disproportions in the distribution of military production and industry as a whole. The rapid escalation of the US war of aggression in Vietnam, started in 1965, led to considerable changes in the distribution of war production. The share of the South and Middle West notably increased, and the share of the Far West reduced in the total of Department of Defence contracts. The reason is that to meet the requirements of its war in Vietnam, the USA sharply increased the manufacture of ordnance, small arms, ammunition, transport vehicles, oil products, apparel and some other goods of which the North and South are traditionally the main producers. This notwithstanding, the share of the North in military production remains smaller than it is in the country’s industrial production as a whole. Let us examine the changes brought on by the Vietnam war in the positions of 10 states handling some two-thirds of all military contracts. 177 Table 30 Distribution of DOD Contracts by State Attributable to Vietnam BuildUp State 1964/65 1966/67 Total value, thous. mii. dollars Share in national total, per cent Total value, thous. mil. dollars Share in national total, per cent California ........ 5.2 1.5 2.2 1.0 1.2 0.8 1.2 0.8 0.7 0.4 22 6 10 5 5 4 5 4 3 2 6.7 3.6 3.3 2.3 1.9 1.6 1.4 1.2 1.1 1.0 18 10 9 6 5 4 4 3 3 3 Texas .......... New York ........ Missouri ......... Connecticut ....... Ohio ........... Massachusetts ...... New Jersey ........ Georgia ......... Illinois ......... p Source: Business Week, February 10, 1968, p. 68. p Table 30 shows that California as before holds first place for the volume of military contracts, but its share has notably diminished. Texas, which has dislodged New York from its second place, has more than doubled the absolute volume Table 31 Distribution of DOD Contracts by State, 1966 State Subcontracts Prime contracts Place Share in total subcontracts, per cent Place Share in ;otal prime contracts, per cent California ..... . . 1 2 3 4 5 6 7 8 9 10 30.2 11.5 7.0 6.0 5.6 5.1 4.2 2.9 2.9 2.8 1 2 9 8 4 7 5 11 3 17 22.1 9.6 3.5 3.7 5.1 4.2 5.1 2.7 6.2 1.8 New York ...... New Jersey ........ Ohio ........... Connecticut ....... Pennsylvania ....... Massachusetts ...... Florida ......... Texas ......... Illinois ......... Source: Business Week, April 8, 1967, p. 38. 178 Table 32 3 QD Percentage Distribution of Surveyed Defence Employment by State and Product Group, June 1966 g Mid-Atlantic P states .... 13.8 4.1 0.9 7.6 7.7 29.3 9.6 6.7 14.7 9 » New York 8.2 — — 0.9 2.5 14.0 8.7 4.2 7.2 1 New Jersey 1.7 3.2 0.9 — 0.6 7.0 0.9 1.7 3.9 § North-East -3 states . . . 12.6 1.9 3.7 35.0 19.5 7.0 3.5 12.6 9.5 w PJ Ohio . . . 8.4 — 0.8 7.6 2.5 0.4 , ____ 2.5 3.6 § o Illinois 0.5 3.9 2.0 3.5 10.2 1.2 § —————— ———– n^ 2 179 Michigan 0.5 1.9 1.7 22.9 — 2.0 — — 1.6 E North-West % states . . . 15.3 0.7 — 9.4 31.8 6.1 __ __ 10.3 > H Missouri 10.4 0.7 — — 12.8 0.6 — — C A 3 5.1 z South-Atlantic o n states . . . 10.4 18.5 28.1 11.2 1.8 11.9 12.1 13.5 12.4 51 Maryland 0.1 6.8 2.3 — 0.3 6.5 — ____ 2Q C o m Virginia — 3.7 25.8 — — 1.1 10.4 ____ M 3.0 g z Georgia . . 7.1 — — — 1.5 — — — 2.6 § South-East * states . . . 2.9 1.4 10.5 — 12.7 — — 4.2 3.3 Tennessee 1.0 0.7 — — 11.8 — — 4.2 1.5 South-West states . . . 12.1 1.2 1.6 — 14.0 3.8 — 5.9 6.8 Texas . . 10.6 0.8 — — 9.8 3.7 — 4.2 5.8 Mountain states

1.0 11.5 — — 0.4 1.0 — — 2.6 Pacific states 15.3 55.0 18.4 12.2 8.6 28.8 68.8 41.8 26.3 California 15.1 42.6 8.9 ’ 11.2 8.6 28.8 68.8 41.8 23.3 Source: Calculated from DOD surveys of military employment, the Centre for Strategic Studies, June 1967, pp. 80–81. Economic Impact of the Vietnam War, 180 of military contracts, mainly by supplies of oil products, ammunition, aircraft frames, food and kindred products. The increase in the volume of contracts in the states of Missouri and Illinois is attributable mostly to a growth in the production of ammunition and transport vehicles. p It was believed until recently that several states won the lion’s share of prime contracts, while the majority of other states secured subcontracts after all. A Department of Defence survey, however, indicated that an even larger share of subcontracts was secured by the above several states for themselves. As Table 31 demonstrates, the 10 states win over 78 per cent of subcontracts, whereas their share in prime contracts is 64 per cent. p Of considerable interest is the geographical pattern of the production of individual types of weapons and military equipment (see Table 32). The State of California holds the leading place in the manufacture of aircraft, missiles, space hardware, radioelectronic and communication equipment, as well as in military research and development. The overwhelming share of shipbuilding work for the Navy is handled in the states of Virginia and Connecticut. The main centres of manufacturing combat vehicles, ordnance and small arms are the states of New England and the North East. More than a half of the ammunition factories are concentrated in the North West and North East. p There are wide variations not only in the geographical distribution of US military production but also between the levels to which the economies of individual states are militarised. According to estimates by the American economist Murray L. Weidenbaum, 20.4 to 30.3 per cent of the total number of factory and office workers employed in the manufacturing industries in seven states, 10.8 to 17.8 per cent in eight states, 5.2 to 9.4 per cent in ten states are employed in the arms industry. [180•1 The territorial distribution of military production and the extent of militarisation of individual states depend to a certain degree on the competition between monopolies and individual states for winning highly profitable military contracts. 181 The Business Week journal writes: "Debate over the ’ fairness’ of defense procurement is never far from the ignition point in Washington—and it is constantly being rekindled on Capitol Hill.” [181•1 The level of militarisation of the economy as a whole and its individual branches, the structure of military production, the geographical distribution of the arms industries and the degree to which different states are militarised are determined in the main by the military and political plans of the USA and the modern development of weaponry. Therefore, future changes in the military strategy of US imperialism and progress in military technology will be undoubtedly accompanied by changes in the absolute and relative scale, structure and territorial distribution of US military production. *** Notes

[180•1] Murray L. Weidenbaum, The Military Market in the United Slates, Stanford, 1963, p. 26. [181•1] Business Week, April 8, 1967, p. 38.

CHAPTER VI ORGANISATION OF US MILITARY PRODUCTION 1. THE ROLE OF THE FEDERAL GOVERNMENT AND PRIVATE FIRMS IN THE MANUFACTURE OF MILITARY GOODS

p Military goods which are identical with or differ but little from analogous civilian goods (food and kindred products, fuel and lubricants, textiles, etc.) are purchased by the government from suppliers according to approved military specifications on the free civil market. Therefore it is unnecessary to discuss the organisation of their production. p The question discussed here is one of organising the manufacture of such specific goods that are produced and used exclusively for military purposes. In relation to these goods, the government not only acts as their sole procurer but it also interferes in the sphere of their production, adapting it to its needs, exerting decisive influence on its scale and structure. p In the pre-monopoly period, armaments were produced mostly by government arsenals. In the First World War, it became clear, however, that the arsenals were unable to meet the increased demand for military hardware. Already at that time, the overwhelming proportion of armaments was manufactured by private Factories. This led to the loss by government arsenals of their former importance, although they continued to play a fairly great role in the development of military technology. For example, in the period between the two world wars, government arsenals and laboratories worked intensively to improve existing and develop new models of armaments to be handed over to private corporations for line-production. On the eve of the Second World War, the 183 US arsenals manufactured almost all weapons for the Army and the bulk of armaments and ships for the Navy. The share of arsenals in arms manufacture dropped to an all-time low in the Second World War and has remained at a low level ever since. At the same time, over the past two decades their importance in total war production decreased both absolutely and relatively. Scant information is available on government munitions factories in the USA. According to some data, in 1963 the Department of Defence had 190 industrial enterprises with total assets worth 7,440.3 million dollars. Some of them are operated by the Department of

Defence, others are leased to private firms. These enterprises manufactured the following types of military products: Product Number of enterprises Investment (mil. dollars) Aircraft and engines ...... 29 881.6 Ammunition and explosives . . 50 2 465.3 Armour heavy weapons, ordnance and small arms ............. 18 694.5 Missiles ............... 19 647.2 Shipbuilding and repair ........ 21 1,622.0 Electronic equipment ......... 10 79.4 Other ................ 43 1,050.3 Total ................. 190 7,440.3 p Source: William L. Baldwin, The Structure of the Defense Market 1955–1964, p. 107. p At present, the number of government arms factories has slightly reduced as the Department of Defence has sold many of them in the past few years. p In the field of military production, the government is considerably involved in the manufacture of ammunition and high explosives, shipbuilding and ship repairs and the production of ordnance and small arms. p Information on the scale of production at government enterprises is usually withheld- A certain exception to the 184 rule is the government shipyards which, according to the 1958 industrial census, handled 672 million dollars’ worth of new constructiqn and repair work. These shipyards handle a sizable proportion of shipbuilding and repair operations for the US Navy. The arsenals greatly contribute also to the supply of the armed forces with ordnance, small arms and ammunition. Almost the whole of aircraft, missile, space, radioelectronic and other major types of modern military equipment is manufactured by private corporations. p In organising the production of military goods, the US Administration gives preference to private manufacturers. This is essentially an unwritten law and, indeed, statutory references seem to contradict it, for the Secretary of the Army is directed "to have supplies needed for the Department of the Army made in factories or arsenals owned by the United States, so far as those factories or arsenals can make those supplies on an economical basis". [184•1 p The following data may be adduced to illustrate the place of private firms in arms production. Over the ten years since July 1, 1950 to June 30, 1960, 90 per cent of the total worth of the Administration’s prime military contracts was placed with private American firms, 6 per cent with foreign and American firms operating outside the United States, 2 per cent with colleges and "non-profit corporations" and 2 per cent with government military enterprises. [184•2 It should be noted that the role of the arsenals is underrated here because these indices cover only that part of the productive activities of government arms factories which are carried out by the armed services for one another, while operations they perform to meet their own needs are left out of account. p Private corporations take over functions connected not only with arms manufacture but also with organising military construction, research and development. Research

institutions of the Department of Defence handle a relatively small share of military research and development. At present they account for slightly over a quarter of the Pentagon’s total 185 expenditures on military research and development. Research institutions of the Department of Defence are involved mostly in "fundamental research" and "exploratory development”. This work is carried out in laboratories, research centres and arsenals under the departments of the Army, Navy and Air Force, respectively. p The bulk of military research and development is conducted by private industrial firms under government contracts financed out of the federal budget. Industrial firms undertake almost every kind of military research and development, concentrating on "engineering development" and " development of operational systems”. Aircraft and missile construction, electrical engineering, radioelectronics and the chemical industry account for the bulk of industrial research and development. p A rough idea of industry shares of military research and development is given by the indices of Table 33 which are concerned with all spending on science, both military and civilian. In view of the high-degree concentration of military research and development in the above branches of the manufacturing industry, it may be stated that their proportion in overall military research and development is much larger than indicated in the table. p Military research is also carried out at universities and colleges. Under contracts with the Department of Defence and other agencies, they conduct varied fundamental research and work on problems of military-economic and military-political importance. In the book Pentagon Capitalism. The Political Economy of War, the American Professor Seymour Melman gives the following data: in 1968, the Massachusetts Institute of Technology filled 119 million dollars’ worth of Pentagon orders, John Hopkins University, 57 million, the University of California, 17 million, Columbia University, 9 million, Stanford University, 6 million. The broad employment of scientists from universities for fulfilling military contracts of the Department of Defence has an adverse effect on the educational system in the USA, lending an increasingly militaristic character to university research. Many students, teachers and scientists in the United States are opposed to the militarisation of American science. 186 Table 33 Industry Shares of R&D Spending 1956–58 1961–63 1963–65 1973–75* Aerospace ........ 34 1 36 5 38 0 42 0 Electrical equipment, radioelectronics ...... 23 4 21 4 19 0 14 1 Communications, electronics . . 10 0 10 9 11 0 11 0 Other electrical .... Chemicals, allied products Industrial chemicals . . Drugs, medicines . . . Other chemicals . . . Motor vehicles, other transportation ........ 13.4 9.4 6.7 1.4 1.3 9 9 10.5 10.1 6.4 1.7 2.0 8 7 8.0 10.3 6.4 1.5 2.4 8 3 3.1 11.5 6.0 1.5 4.0 6.5 Machinery ...... 8 8 7 9 7.6 6.3 Scientific, professional equipment ......... 3.2 3 8 4.1 5.2 Scientific, measuring instruments ...... 1.8 1 8 1 8 1.8 Optical, surgical, other instruments ..... 1 4 2 0 2 3 3.4 Petroleum refining, extraction .......... 2.9 2 6 2 5 2.2 Rubber .......... 1.2 1 2 1.2 1.2 Food, kindred products . . Primary metals ...... 1.0 1 5 1.1 1 5 1.1 1.8 1.4 2.3 Ferrous metals .... Nonferrous metals . . Stone, clay, glass products Paper, allied products . . . Textiles, apparel

..... 0.9 0.6 0.9 0.5 0.25 0.9 0.6 1.0 0.5 0 3 0.9 0.9 1.0 0.6 0.2 1.0 1.3 1.2 0.7 0.3 Lumber, wood, furniture Other industries ..... 0.15 2 8 0.1 3 2 0.1 4.2 0.1 5.0 p * Estimate. Source: Chemical Week, August 14, 1965, p. 62. p After the Second World War, the US Administration has been widely using "non-profit corporations" to solve military, military-political and military-economic problems. The "non-profit corporations”, otherwise known as "think factories" or "brain centres" of the Pentagon, incorporate definite 187 features of universities, government agencies, industrial firms and private foundations, while differing from them on the whole. These corporations are considered independent organisations supported with sums they derive under contracts, as well as with subsidies from various private foundations. p The establishment and broad use of "non-profit corporations" by the Administration is traced to the following main causes: first, the growing importance of science in settling political, military and military-economic problems; second, the difficulty of getting leading scientists to work at government institutions where the pay is relatively low and their habitual conditions of work and freedom of research are lacking; third, efforts to supply government officials in top decision-making positions with objective analysis data uninfluenced by red-tape and departmental parochialism. " Nonprofit corporations" more effectively meet these requirements. They pay much larger salaries to their employees than government institutions, provide better conditions for research. p The entire variety of "non-profit corporations" may be divided into three categories: p 1. Research institutions and laboratories under universities which usually conduct applied research and experimental work for the military departments. They include, in particular, the Jet Propulsion Laboratory at the California Institute of Technology and the Lincoln Laboratory of the Massachusetts Institute of Technology. p 2. Technological corporations which assist government agencies in organising the management of large technological programmes fulfilled by industry. Such are Aerospace and MITRE to cite but two examples. p 3. Advisory corporations which carry on research into military-political, militaryeconomic, technological and other problems. The most important of them are RAND, the Hudson Institute, the Institute for Defence Analyses, etc. p The best known of these is RAND which was set up in 1946 as an independent subsidiary of Douglas Aircraft corporation, and in 1948 became a "non-profit corporation”. Research for the Air Force holds pride of place in the activities of this corporation in addition to general research for the Department of Defence. RAND employs about 1,000 188 staff workers, has several research departments for economics, sociology, etc. The works of this corporation, mostly classified, have substantial influence on shaping military strategy and methods of directing US military-economic activity. In this connection RAND research in the field of systems analysis and

introduction of the "planning– programming-budgeting" system deserves special attention. p Non-government institutions have a leading role to play in research and development sponsored by NASA and other government agencies. NASA employs numerous industrial firms and other organisations for work on its programmes. In 1965–66 the total value of NASA contracts for the development and production of varied space hardware reached 5,032 million dollars, about 81 per cent of this sum going to private firms, 5 per cent to the Jet Propulsion Laboratory at the California Institute of Technology, 4 per cent to higher educational institutions and "non-profit corporations”, and 10 per cent to other government agencies. p In this way, the US Administration finances two-thirds of all research and development carried out throughout the country, while government agencies handle less than 15 per cent of this work. Over 85 per cent of research and development is conducted by private industrial firms, colleges, universities and "non-profit corporations" (see Table 34). The table shows that the main research and development bodies are private industrial companies whose share in the use of common funds amounts to about three-fourths, whereas their share in financing is equal approximately to onethird. p Among the highly developed capitalist states, the USA stands out not only for the huge scope of its military production but also for its being in effect the only country where private companies supply the overwhelming proportion of military goods and services to the government. Having transferred the functions of producing military goods to private corporations, the Administration at the same time renders them great assistance in organising and regulating the development of military production. p This assistance primarily takes the form of highly profitable military contracts. It is precisely by specifying the volume, structure and geographical distribution of these 189 Funds for Performance of Research and Development (mil. dollars, per cent) Table 34 o o z C/J R&D performer 1953 1955 1957 I960 1963 1964 1965 1967 1970 1971 Federal Government . . . 1,010 19.6 900 14.4 1,220 12.3 1,730 12.6 2,280 13.1 2,840 14.8 3,093 15.1 3,395 14.3 3,600 13.4 3,650 13.1 Industry . . . 3,630 70.4 4,640 74.0 7,730 78.1 10,510 76.7 12,630 72.8 13,510 70.4 14,185 69.4 16,420 69.4 18,910 70.4 19,800 71.1 Universities, colleges, etc. 420 8.1 590 9.4 770 7.8 1,190 8.7 1,890 10.9 2,220 11.6 2,451 12.0 3,002 12.7 3,400 12.7 3,460 12.4 Other non– profit institutions 100 1.9 140 2.2 180 1.8 280 2.0 550 3.2 610 3.2 720 3.5 863 3.6 940 3.5 940 3.4 Total .... 5,160 100 6,270 100 9,900 100 13,710 100 17,350 100 19,180 100 20,449 100 23,680 100 26,850 100 27,850 100 > o O O o Sources: Statistical Abstract of the United States, 1967, p. 537; 1970, p. 519; 1971, p. 509. 190 contracts that the government, that sole military customer, regulates the development of military production.

p The striving of the monopolies to get hold of a share of huge military contracts contributes to the investment of private capital in specialised arms industries. It should be noted, however, that private businessmen use all ways and means to make the state budget bear the brunt of financing capital construction. p In wartime, huge government demand for weaponry dictates the need for expanding arms production. In the First World War, the USA secured this expansion mostly through private capital investments and in the Second World War, through government investments. For example, the government share in the total expenditures on construction in the period 1915–18 was about 30 per cent, whereas from 1940 to 1945 it increased approximately to 60 per cent. [190•1 Such an increase in the share of government spending was mostly due to the fact that the monopolies, aware of the experience of the First World War, refused to invest capital in the arms industry, because demand for its products sharply fell once a war was over. Therefore, the US Administration, faced as it was with the need to expand arms production, was compelled to finance the construction of a large number of government enterprises, many of which were sold at token prices to private corporations after the end of the war. Government enterprises were particularly numerous in the aircraft, shipbuilding, steel, synthetic rubber, and other industries. Moreover, the Administration, using the so-called system of accelerated rate of depreciation, provided very privileged terms for private capital investment in arms factories. The system of accelerated rate of depreciation was first employed in the United States during the First World War. However, it became widespread during the Second World War and the US war of aggression in Korea. The USA is still using this system to stimulate military production. p Technically, the system of accelerated rate of depreciation grants nothing but tax concessions to the monopolies. The 191 capitalist is entitled to write off the cost of a newly built enterprise within a shorter period (five years) than its average lifetime. In this way, industrialists, by overstating production costs, considerably understate income subject to taxation, thereby boosting monopoly profits. But the advantages they gain from the system of accelerated rate of depreciation are not limited to tax privileges. As a matter of fact, the overstated depreciation charges are included by military contractors into the prices of supplies to the government, i.e., this system stimulates the inflation of prices of military goods, which also increases the profits of monopolies at the expense of the state budget. Thus, the system of accelerated rate of depreciation is in effect a surreptitious form of government subsidising of private industries. In the USA, private capital investments entitled to accelerated rate of depreciation amounted to 650 million dollars in the First World War, 5,700 million in the Second World War, and 21,500 million during the war of aggression in Korea. [191•1 p An important form of government stimulation of arms production is the lease of government production facilities to private manufacturers, provision of them with equipment in short supply, raw materials and manpower. This form of assistance is practised on a particularly wide scale in wartime. According to Department of Defence estimates, at the end of 1967, the total value of government property ( industrial plant,

real estate, special testing equipment, etc.) leased to Pentagon contractors was about 15,000 million dollars. This property is used by approximately 5,500 firms. [191•2 p In 1956–57, the General Accounting Office held an inquiry into the use of government property by lease-holders of the Department of Defence and revealed crying abuses. It was found, for example, that 21 firms (FMC, Holley Carburetor, Raytheon, Boeing, etc.), and two universities (in Chicago and the State of Maryland) misused about 1,000 million dollars’ worth of government property at their disposal. These firms illegally used government equipment 192 for manufacturing market goods, did not pay rent in full, etc. Senator William Proxmire, Chairman of the Subcommittee on Economy in Government of the Joint Economic Committee, stated that military contractors were wasting "hundreds of millions of dollars a year" through improper use of Defence Department property. [192•1 p The government grants direct subsidies to private arms manufacturers, for example, shipbuilding companies. Advancing money to Defence Department contractors has become a widespread practice. According to the Pentagon’s official statistics, the total sum of advance payments to 1,174 industrial firms under uncompleted military contracts had reached almost 6,200 million dollars by June 1967, the Navy accounting for 3,400 million, the Air Force, for 2,100 million, the Army, for 700 million. The twelve biggest firms handling 100 million or more dollars’ worth of military contracts each, received over 61 per cent of the total advance payments, whereas the share of 63 firms with 10 million dollars’ worth of contracts each, was 89 per cent. The biggest recipients were General Dynamics (871 million), Lockheed Aircraft (765 million), United Aircraft (328 million), New York Shipbuilding (314 million), and Boeing (172 million). [192•2 p According to legislation, advance payments should not exceed 75 per cent of current inputs under contracts with small firms, and 70 per cent, with big firms. Not infrequently, however, advance payments to big companies cover 90–95 per cent of their current inputs. p Arms-manufacturing firms use all of the above-mentioned levers to finance the bulk of their capital construction out of the state treasury. As it follows from a report of the House Subcommittee on Armed Services, 72 per cent of the fixed capital of the airplane companies was supplied by the government. [192•3 p Private firms have built up, mostly from government funds, huge productive capacities capable, in an emergency, 193 of substantially expanding military production. The government, which gives private firms financial assistance and is their single customer, regulates and plans military production. With this end in view the US Administration implements a series of monopoly measures. Special government institutions have been set up for programming military industrial development and for effecting measures preparatory to mobilisation. Detailed plans of economic mobilisation, etc., have been drawn up in advance.

The US ruling quarters are trying to adapt thoroughly the country’s huge economic potential to military needs. *** TEXT SIZE

Notes [184•1] M. J. Peck, F. M. Scherer, op. cit., p. 97. [184•2] Planning and Forecasting in the Defense Industries, cd. by J. A. Stockfish, p. 145. [190•1] The Economic Almanac 1953–1954, New York, 1953, p. 195. [191•1] Walter Adams and Horace M. Gray, Monopoly in America. The Government as Promoter, New York, 1955, pp. 85–87. [191•2] Missile Space Daily No. 40, 1967. [192•1] The New York Times, January 6, 1968. [192•2] Detroit Free Press, June 1, 1967. [192•3] Victor Perlo, Militarism and Industry. Arms Profiteering in the Missile Age, London, 1963, p. 38.

2. MILITARY PROCUREMENT POLICY AND PRACTICE

p The expansion of the specialised private military sector of the economy went hand in hand with the development of a definite regulation system in relations between the government and private business, of the methods for stimulating military production. p In the scheme of relationships between the government and private military corporations it is necessary to single out the system of military contracts and the formation of military goods prices, the two levers by which the government regulates the development of military production. p Military Contracts. The relations of the Administration with private firms are based on contractual principles. It is precisely through a system of contracts that the government orders the required military products, specifies their quality and structure, as well as the place of their manufacture. p During the Second World War, the government’s relations with private suppliers were normally based on the following principles. The Administration procured the greater part of armament units and parts and military equipment directly from suppliers and handed over these components to the main assembly enterprises manufacturing end-products. Under this system, government procurement agencies signed contracts and maintained direct connections with almost all military suppliers. 194 p After the war, the Administration gradually changed over to another system, more and more often signing contracts only with prime contractors obliged to develop and produce military goods under a given contract. The prime contractor usually fulfils the most important part of the contract, handing over the remaining part to subcontractors which, in turn, transfer a considerable part of the subcontracts to subcontractors of a "third order”, the latter to still smaller concerns, etc. The prime contractors are responsible to the government for deliveries of military endproducts—missiles, aircraft, etc.

p Under this system of procurement the government hands over a considerable part of its contract supervising functions to the prime contractors. The latter enjoy greater freedom in supervising military orders, in selecting subcontractors and subsuppliers. Procurement agencies of the armed forces only control and co-ordinate the work of suppliers. Even this, however, causes discontent of the arms-manufacturing monopolies aspiring to full freedom of action. p Another practice is one of "joint contractors" undertaking basic deliveries of large components of weapons systems, for example, engines, radar units. Under this system, no company is appointed to direct the fulfilment of a contract for the entire weapons system. The assembly and testing of weapons are carried out by one of the "joint contractors”. p Prime contractors for aircraft and missiles are usually chosen among companies producing the main structure of an article; for warships, the yards; for combat vehicles, motor companies. The prime contractor is responsible to the government for the fulfilment of a military contract whereas the subcontractors supplying units, parts, components or raw materials are responsible to the prime contractor. p Military contracts are subdivided, according to the method of distribution, into contracts signed on the basis of wide competitive bidding and contracts signed behind closed doors, i.e., in direct negotiations between procurement agencies of the Defence Department and private corporations. p Until 1947, the only legal method of signing military contracts was competitive bidding, both secret and public. 195 The Armed Services Procurement Act of 1947 lifted this restriction and gave the armed services full freedom in choosing the form of making contracts save for "cost– plusa-percentage" contracts which were specifically forbidden as ineffective. When he signed the Act of 1947, President Truman wrote to the Secretary of Defence, "This bill grants unprecedented freedom from specific procurement restrictions during peacetime". [195•1 p This "unprecedented freedom" of the Defence Department was widely used by the military-industrial complex in its interests. Those types of contracts which ensured the highest profits for the monopolies became the most sought after. This is one of the main reasons for the overwhelming share of military contracts being concluded behind closed doors, i.e., without announcing them in the press, the Pentagon’s agencies directly selecting suppliers of the required goods and services. In the period 1951–65 the Defence Department signed more than 357,000 million dollars’ worth of contracts, of which only 13.7 per cent worth 49,000 million dollars were signed on a competitive basis, whereas the remaining 86.3 per cent worth 308,000 million dollars were signed behind closed doors. [195•2 Almost all purchases of missiles and aircraft were made in secret; in this sphere, competitive bidding accounted for only one per cent of all contracts. p The need for closed-door bidding is largely motivated by such factors as the limited number of specialised firms capable of quickly manufacturing definite high-quality specimens of sophisticated weapons systems, the specific features of military production,

observance of secrecy, etc. If it were not for profit-chasing, however, the share of secret contracts would have been much smaller than it is. The point is that these contracts make it impossible for the Administration to take advantage of competition, and give much freedom for abuse both on the part of government officials signing contracts and corresponding corporations. As a result, secret bidding leads to procurement of military supplies at exorbitant prices. 196 p According to estimates of the US General Accounting Office, when concluding noncompetitive contracts the Defence Department loses an average of 25 cents per dollar of spending, which amounts in the aggregate to a tremendous sum. The Pentagon’s procurements under direct negotiations in the period 1951–65 were worth 308,000 million dollars. It may be calculated on this basis that the sums the Pentagon forfeited over the period through the absence of competition in signing contracts amounted to about 77,000 million dollars, or an average of 5,400 million dollars annually. p To reduce these colossal irrational expenditures, the Defence Department has carried out considerable work to reduce the share of non-competitive contracts in favour of competitive ones. In the event of competitive bidding, the Pentagon’s intention to buy or order concrete goods and services is announced in the press in advance. Then the suppliers are chosen and contracts concluded with those of rival firms offering their services whose terms are more acceptable for military agencies. As a result of these measures, the share of competitive contracts in the total value of military contracts grew from 14 per cent in 1959/60 to 47 per cent in 1966/67. [196•1 p Price Formation on the Military Market. A distinctive feature of price formation on the military market is the fact that prices of military goods are set not by the laws of the free capitalist market but at the talks between representatives of government procurement agencies and private suppliers. Under the operating system of payments for military supplies four basic types of contracts are used: p 1. Cost; p 2. Cost-plus-fixed-fee; p 3. Firm-fixed-price; p 4. Incentive type: (a) cost-plus-incentive-fee; (b) fixedprice-incentive. p Under the cost contracts, the contractor is reimbursed for all expenses involved in fulfilling a military contract. Such contracts are usually made with higher educational establishments and other “non-profit” research institutions. 197

p Under the cost-plus-fixed-fee contracts, contractors are reimbursed for all authorised expenses involved in fulfilling military contracts and, in addition, are paid a fixed fee (profit). p Introduction of cost-plus-fixed-fee contracts was largely due to the rapid increase in the Pentagon’s procurements of the share of the latest types of weapons and military equipment for whose development and production corporations had neither experience nor appropiate research and production facilities. Therefore, the Defence Department, in an effort to interest firms in the production of sophisticated armaments, was compelled to guarantee them against possible losses through a price-formation system based on the cost-plus-fixed-fee principle. However, the wide spread of such contracts was also due to their being highly advantageous for monopolies manufacturing military goods. As a result, the share of these contracts in the total of prime contracts (in terms of value) grew from 8.6 per cent in 1951 to 34.3 per cent in 1959. [197•1 p Contracts repaid on the cost-plus-fixed-fee principle are the most extravagant and ineffective. They guarantee payment equally for good and inadequate work of the supplier. What is more, these contracts far from stimulating better work of suppliers in the way of reducing production costs and prices, lead, on the contrary, to an artificial inflation of outlays because under this item the contractor is reimbursed for all expenses reported, and guaranteed a fixed fee irrespective of the efficiency of his work. p These contracts are conducive to artificial price rises through a system of subcontracts, which results at times in multistage contracts with hundreds of successive subcontractors. Using the system of subcontracts, prime contractors greatly overstate their outlays, including therein expenses and even profits of subcontractors, and this enables them to increase their own profits also through outlays made by subcontractors. In this way, both subcontractors and prime contractors derive profits from one and the same work involved in fulfilling a contract, i.e., a veritable "pyramid 198 of profits" is formed, as was stated by the McClellan Committee in September 1962. p As a result of these and other drawbacks in the system of calculation of all the elements of spending on arms production, actual payments for military programmes fulfilled are sometimes 3-10 times the initial estimates. p The proportion of cost-plus-fixed-fee contracts in the total of contracts reached an alltime high in 1960/61 when it rose to 38.9 per cent as against 19.7 per cent in 1954/55. [198•1 p After a long study of the system of distribution and payment under military contracts the Defence Department issued in March 1962 a supplement (No. 8) to Armed Services Procurement Regulation which denounced cost– plusfixed-fee contracts and emphasised that the best type of contracts was that stimulating contractors to reduce military production costs.

p According to these principles, the best contracts are admittedly those based on firm fixed prices (i.e., with deliveries repaid at prices stipulated in advance). In this case, a contractor has an incentive to reduce production costs because he retains all additional profit. There are cases, however, where firm-fixed-price contracts cannot be secured for a number of reasons, for example, owing to the impossibility to reckon the final cost of an order. In such cases the Defence Department employs various types of incentive contracts stimulating contractors to reduce production costs, and improve the quality and scheduling of arms supplies. p For several years now, the Pentagon has been implementing practical measures to replace the ineffective costplus-fixed-fee contracts with the more preferable fixedpriceincentive contracts. As a result, the share of cost– plusfixed-fee contracts reduced to 20.7 per cent by 1962/63, and further to 10.4 per cent by 1967/68. The share of fixed– priceincentive contracts grew from 14.4 per cent in 1960/61 to 26.1 per cent in 1967/68. [198•2 199 p Replacement of cost-plus-fixed-fee contracts by fixedprice-incentive contracts cuts procurement prices by 10 per cent on the average. [199•1 p Under fixed-price-incentive contracts the prices of goods to be supplied are agreed on in advance, which eliminates the above-mentioned drawbacks of cost-plus-fixed-fee contracts. Moreover, when signing such contracts, contractors are faced with definite additional tasks (reduction of production cost, improvement of tactical and technical characteristics and reliability of weapons, punctuality of execution of an order and of deliveries, etc.), which provides material stimuli for more efficient work by contractors deriving an additional fee varying with the degree of fulfilment of these tasks. In case production costs have been reduced, 5 to 20 per cent of saved funds is retained by the contractor as an incentive profit, the rest going to the Treasury. If the accuracy of hitting the target by a missile is increased 15 per cent as compared with the initial project, the contractual price may be increased 30 per cent. p For bad performance (violation of contractual delivery terms, impaired product quality, etc.) contractors are subjected to monetary fines. p Thus, the Defence Department attempts to achieve a relative reduction of the cost of military procurements by making the rate of profit directly dependent on the efficiency of contractors. The Defence Department also takes measures to improve the system of control over the fulfilment of military contracts. For this purpose, the so-called PERT method (Program Evaluation and Review Technique) is used on an increasing scale in two variants: PERT/time and PERT/cost. The PERT/time technique is used to determine the time required for fulfilling every type of work under a given programme and to draw up an integrated operational time schedule. This enables determination of provisional optimum performance rates and the minimum time required for fulfilling the programme as a whole. The PERT/cost technique is used to draw up an integrated operational cost

schedule for individual jobs under the programme and to reveal the possibilities for economising. 200 p The use of these two techniques in combination makes it possible to establish the conformity of actual spending and scheduling to those estimated beforehand. In addition, efficient organisational and technological measures could be outlined to save time and funds in fulfilling contracts. The PERT technique developed in 1958 began to spread rapidly both in military and civilian industries. It is used on the widest scale in research and development and in construction, and is helpful both to the client (for control over the progress of the work) and to the contractor (for operational planning). p Until recently, every military department and agency distributed contracts and supervised them independently. Early in 1965, a special centralised body—the Defence Contract Audit Agency—was set up and authorised to audit the contracts of all military departments and agencies. [200•1 The main motive for instituting it was to give auditors greater independence from those military departments whose contracts they were to examine, as well as to achieve an economy of funds by reducing the number of auditors. Simultaneously a uniform accounting procedure was prescribed for all armed services. p In this way, the Defence Department, by rationalising the system of distribution of and payments under military contracts, as well as by tightening control over their fulfilment, attempts to enhance the responsibility and efficiency of military suppliers and, in the final analysis, to reduce procurement prices. p These measures allow saving fairly large sums, but fail to do away with the main flaws in the existing forms of payments for military supplies which result as before in inflated prices of military goods. p We have dwelled above on those causes of price rises which are rooted in the growing cost and the objective factors of advancement of military technology, the character of military production and its specific features. In addition to these causes, traceable to changes in the production sphere, price rises result from growing inflation and the abovementioned drawbacks in the system of distribution of and payments under military contracts. 201 p It is difficult to ascertain how much a price rise is due to production changes and how much to defects in the priceformation system. We believe that changes in living and materialised labour spending per unit product of analogous military items may provide an approximate index demonstrating the degree to which production factors are responsible for price rises.

A price increase roughly correspondent with the growth of labour consumption of products would be a legitimate phenomenon. Actually, however, prices evidently tend to grow more quickly than the labour consumption of military goods, a fact which is due to the general inflationary tendencies and the resultant depreciation of the dollar, as well as to the features peculiar to the sale-and-purchase processes on the military market. This cuts the effectiveness of military spending because the growth of prices unconnected with an increase in the labour consumption and an improvement in the combat characteristics of weapons leads to a situation in which the Pentagon acquires less and less military goods for every dollar spent. *** TEXT SIZE

Notes [195•1] Arthur Smithies, The Budgetary Process in the United Stales, New YorkToronto-London, 1955, p. 299. [195•2] Clark R. Mollenhoff, The Pentagon, p. 419. [196•1] Christian Science Monitor, December 5, 1967, p. 19. [197•1] Background Material on Economic Aspects of Military Procurement and Supply, Washington, 1960, p. 94. [198•1] Impact of Military Supply and Service Activities on the Economy, Washington, 1963, p. 29. [198•2] Congressional Record, July 11, 1968, p. H6416. [199•1] Missiles and Rockets, March 25, 1963, p. 33. [200•1] Fortune, July 1965, p. 120.

201 3. CONCENTRATION AND CO-OPERATION OF ARMS INDUSTRIES

p The manufacture of sophisticated modern military equipment some types of which incorporate scores of thousands of parts demands wide specialisation of and cooperation in production. Numerous enterprises of various industries often share in handling a military contract. Every year, the Defence Department concludes about 15 million deals in 850 specialised fields of supply. It has among its suppliers about 20,000 prime contractors and 100,000 subcontractors. A small number of large industrial companies and a host of small military suppliers are involved in military production in the USA. Large monopolies, however, seize the lion’s share of government contracts. Their share was particularly great in the late fifties and early sixties (see Table 35). The reason was that in that period the proportion of missiles, aircraft, radioelectronic equipment and other military goods manufactured, as a rule, by few highly specialised industrial 202 companies substantially grew in the total number of military contracts. The escalation of the Vietnam war demanded a sharp increase in the absolute and relative scale of production of conventional armaments, apparel, food and kindred products, which led to an increase in the share of companies of corresponding industries, medium-sized and small firms in the total military contracts, and to a decline in the share of large companies manufacturing the most sophisticated types of modern equipment. In the past few years, however, the share of large firms in the total of military contracts has been growing again. Table 35 Distribution of DOD Prime Contract Awards (percentages to total) Including * Years 100 biggest prime contractors SO leading contractors 51–100 other big contractors Small business concerns June 1940-September 1944 67.2 57.6 9.6 22 July 1950-June 1953 64.0 56.3 7.7 January 1955-June 1957 67.4 59.5 7.9 1957/58 74.2 66.9 7.3 17.1

1959/60 73.4 64.8 8.6 16.1 1962/63 73.9 65.6 8.3 15.8 1964/65 68.9 61.2 7.7 19.6 1965/66 64.0 55.1 8.9 21.4 1966/67 65.5 56.1 9.4 1967/68 67.4 57.1 10.3 18.8 1968/69 68.2 56.9 11.3 17.8 1969/70 69.7 59.3 10.4 1970/71 72.1 63.1 9.0 17.0 1971/72 72.1 62.7 9.4 18.0 p Sources: W. L. Baldwin, The Structure of the Defense Market, 1955–1964, p. 9; M. J. Peck, F. M. Scherer, The Weapons Acquisition Process. An Economic Analysis, p. 118; Interavla Air Letter, December 22, 1966, p. 3; Missile Ordnance Letter No. 380, November 15, 1970, p. 1. p The above data somewhat overstate the actual level of concentration of military production within large monopolies, since about one-half of the military work of the large 203 concerns is subcontracted, with approximately 40 per cent of the amount subcontracted going to small business concerns. [203•1 p The specific nature of military production, its dispersion between industries and the immense range of military goods forbid assessment of the concentration of military production as a whole according to those conventional criteria (relative volume of output, number of employees, size of assets, and productive capacities) that are used for this purpose in the civilian branches of the economy. Hence the impossibility to correlate the level of production concentration in the military branches of industry with that in the civilian branches or in industry as a whole. Some American economists maintain that the level of concentration in the arms industry is lower than, for example, in the automotive or the aluminum industry in which concentration is strikingly high. [203•2 p The leading arms monopolies are the biggest business concerns not only in terms of military production but also by the general standards of the US economy. This is evidenced by the fact that many of the 100 biggest military corporations belong among the 100 biggest industrial monopolies of the USA. p The number of firms belonging to both groups of large firms greatly increased during the Second World War, mostly among the aircraft companies. In that period, of the 24 military suppliers among the 100 huge industrial firms 15 were aircraft companies, which was the result of the rapid development of the industry. When estimating the number of firms which belong simultaneously to both groups of large monopolies, military building contractors and " nonprofit corporations" are excluded because they cannot be listed among industrial companies. p The composition of the 100 leading military suppliers is unstable. At present, for example, they include many companies which were not on the list in the Second World War and even in the period of the US aggression in Korea, and, conversely, many large military monopolies of the above periods are not among them today. p Of considerable interest is analysis of the distribution of 204 large military monopolies between industries. In this respect, the most striking fact is that among the leading military suppliers the proportion of motor and shipbuilding companies and companies of

other industries has sharply diminished and, conversely, that of aircraft and electronics companies has significantly increased. These changes are associated with alterations in the structure of military contracts which, in turn, are due to the rapid development of weaponry, as well as to changes in military strategy. p Of the 100 leading arms manufacturers, 57 are directly involved in aircraft and missile construction or the production of electronic instruments for these industries and related research; 12 are suppliers of missile fuel, aircraft petrol and other oil products; 7 build military bases in US territory or overseas; 4 are shipbuilding firms; 6 manufacture combat vehicles, and the other 14 supply ordnance, small arms, ammunition or render various services to the armed forces, 5 of the latter firms being "non-profit corporations". [204•1 p The distribution of companies between individual industries is based on their basic specialisation, although individual companies manufacture products uncharacteristic of their industries. For example, General Dynamics is listed in the aircraft industry, but it also builds submarines and has electronics and nuclear divisions manufacturing corresponding military goods. p The great changes in the structure of military production entail variations in the composition of leading arms– manufacturing companies and in their relative importance in military supplies. For example, the biggest automotive company General Motors ranked first for the total value of military contracts it won during the Second World War and the US war in Korea, whereas by 1958–60, it had slid to 21st place and in 1969–70 placed seventeenth. In the past few years, Lockheed Aircraft has been in the lead for the total value of military contracts although in the Second World War it was tenth and during the Korean war, seventh. Individual major military suppliers exhibit great discrepancy between their positions among the 100 leading 205 military and among the 100 leading industrial monopolies. For example, in 1970, Lockheed Aircraft ranked first for the value of military contracts among the 100 leading military monopolies and 33rd among the 100 leading industrial corporations. At the same time, General Motors, which was in 17th place for the value of military contracts, ranked first in total output. This discrepancy is due to the difference between the shares of military goods in the total output of individual leading military suppliers. Table 36 Distribution of Firms by Percentage of Total Sales Made to the Department of Defence or Government in Calendar Years 1957 and 1962 for 57 Reporting Finns Share of war Number of supplies in total companies company sales. per cent 1957 1962 90–100 13 10 80–89 5 6 70–79 5 10 60–69 5 3 50–59 1 2 40–49 3 2 30–39 2 6 20– 29 5 5 10–19 4 3 0-9 14 10 57 57

p Source: W. L. Baldwin, The Structure of the Defense Market, 1955–1964, p. 75. p Leading military suppliers widely differ from one another for the level of specialisation of firms manufacturing military goods. The relationship of military output to the total output of a company may be a criterion for assessing this specialisation. p In 1962, 29 companies had a 60 to 100 per cent share of military goods in the total value of their marketed products. Among such firms are Lockheed Aircraft, Martin Marietta, and others. There are a few companies whose military production is great in absolute figures but forms a small share in relation to total output. General Motors is an example in point. p We discussed above the role of a relatively small number of leading military contractors who hold a dominating position in military production. Let us also examine the role of the multitude of small companies in the production of military goods. p In the terminology of US Defence Department procurement agencies small business concerns are firms with less 206 than 500 employees. [206•1 To assess the importance of these firms in military production it is necessary to ascertain their role as prime contractors and as subcontractors of large corporations. During the Second World War, small business concerns won 22 per cent of all prime military contracts. Their share decreased in the fifties and early sixties, as is illustrated by Table 35. Small firms play a relatively big role in procurements by the Army and a smaller role in procurements by the Air Force. p Small business concerns have different roles to play in supplies of various kinds of military goods. These firms account for an insignificant share of arms contracts, particularly for missile systems and aircraft equipment, while their share in the total contracts for military construction, food, textiles and clothing supplies amounts to over 50 per cent. [206•2 It is characteristic that firms having under 500 employees produce the bulk of the above-listed goods. p Small corporations win on the whole a much smaller share of military contracts in contrast to their place in the national economy. This question has been repeatedly discussed in Congress, and even legislation was adopted to give small firms priority in military contracts awards. For example, the Armed Services Procurement Act of 1947 states that "a fair proportion of the total purchases and contracts ... shall be placed with small business concerns”. Similar provisions are contained in the Defense Production Act of 1950. In view of the above congressional legislation, the Defence Department took some steps to increase the share of small firms in military contracts. However, this measure failed to yield practical results. The 1958 report of the House Committee on Small Business states: "Unless there is a change in both the attitude and approach by the Government procurement agencies in dealing with small business it will not receive a fair share of Government contracts.” [206•3 It was only the war in Vietnam, as noted above, that led to a certain increase in the share of small firms in the total military supplies.

207 p The insignificant share of small firms in many military contracts is due in the main to their inability to compete against large specialised military monopolies which have important strings in the Pentagon and, what is decisive, their factories in respect of technological facilities, composition and qualifications of manpower are more suited to manufacturing modern sophisticated weaponry than those of small companies. p In addition to large and small companies, prime military contracts are also placed with medium-sized companies not listed among the 100 leading military suppliers or among small firms. There is scant information on the role of medium-sized firms in military production. If the share of large and small firms is excluded from the total military contracts, it may be presumed that the share of mediumsized companies in the total military supplies will amount roughly to 9-10 per cent. p This distribution of prime military contracts among prime contractors does not correspond to the true role the abovementioned groups of firms play in handling military contracts. Prime contractors subcontract part of their work, while often acting as subcontractors themselves. p Prime military contractors, just as all other commodity producers, acquire from other companies raw materials and stores necessary for military production. With the use of increasingly complex and special materials and manufactured units and parts in military production, the relations between prime contractors and supplier companies assume the character of continuous production co-operation on the basis of subcontracts, whereby the prime contractor offers a fixed fee stipulating definite terms and requirements concerning the type of products, their quantity, quality and delivery terms. p The system of subcontracts has become widespread in the US arms industries. Unfortunately, full information on subcontracts is unavailable. Using data from the reports of large Defence Department contractors, Peck and Scherer give the following information on this question. From 1956 to 1959, 61 big military contractors paid other companies 50 per cent of their total income from prime military contracts and subcontracts. This value includes both payments for 208 Table 37 Military Contract Receipts and Intel-business Payments on Military Projects, 61 Companies: Fiscal Year 1959* Category Military contract receipts Number of com panies Total, mil. dollars From prime contracts From subcontracts and purchases mil. dollars per cent of total mil. dollars per cent of total Large airframe and missile ...... 5 6 5 5 7 8 5 8 5 7 5,092.1 1,884.8 295.8 413.8 3,553.8 542.9 1,286.6 508.2 1,509.0 1,217.8 4,333.0 1,835.0 210.2 257.9 2,785.9 378.5 1,084.1 234.5 1,353.8 1,019.4 94.9 97.4 71.1 62.3 78.4 69.6 84.3 46.1 89.7 83.7 259.2 49.6 85.6 156.1 767.8 165.2 202.1 273.5 155.1 ^198.2 5.1 2.6 28.9 37.7 21.6 30.4 15.7 53.8 10.3 16.3 Medium airframe and missile ...... Small airframe and missile ..... Aircraft and missile assembly and components ...... Broad electronics— Laree ..... Broad electronics— Military electronics— Larfire ...... Military electronics— Medium ..... Aircraft and rocket engines ..... Automative and heavy machinery .... Total ........ 61 16,304.8 13,492.3 85.8 2,312.4 14.2 209 Intel-business payments on military

projects Total Small business Large business mil. dollars percentage of total military contract receipts mil. dollars percentage of interbusiness transactions mil. dollars percentage of interbusiness transactions 2,757.7 54.1 762.5 27.7 1,994.8 72.3 917.5 48.7 283.6 30.9 633.8 69.1 124.3 42.0 68.2 54.9 56.1 45.1 187.2 45.2 106.5 56.9 80.9 43.2 1,767.7 49.7 622.2 35.2 1,145.5 64.8 202.7 37.3 108.2 53.4 94.3 46.5 615.1 47.8 288.6 46.9 326.0 53.0 288.5 45.0 106.6 46.7 121.8 53.3 753.2 49.9 302.4 40.2 451.0 59.9 596.3 49.0 201.9 33.9 303.8 66.0 8,150.2 50.0 2,850.7 35.0 5,298.0 65.0 * Due to rounding, percentage totals may be off slightly. Source: M. J. Peck, F. M, Scherer, The Weapons Acquisition Process. An Economic Analysis, pp. 154–55. 210 purchased materials and manufactured parts and components and payments under subcontracts. [210•1 p The extent of subcontracting varies with individual categories of prime contractors (see Table 37). Large and medium-sized companies manufacturing aircraft frames and missiles are in the lead both for the relative rate of income from prime military contracts and for the amount of subcontracted business going to other firms. Companies manufacturing electronic equipment depend more on income from subcontracts and have the smallest share of their work subcontracted to other firms. p Table 37 also shows that 65 per cent of the subcontracts of the above-said large military contractors are placed with large companies and only 35 per cent with small firms. Hence the conclusion that the system of subcontracts somewhat reduces the share of large companies and correspondingly increases the proportion of small firms in the total output of military goods. For example, in 1957 prime contractors paid a total of 3,562 million dollars to small firms under subcontracts. If this sum is added to that of prime military contracts placed with small firms in the same year (3,783 million dollars) the total value of their military contracts will amount to 7,345 million dollars, while their share in the total value of military contracts will grow from 20 to 30 per cent. For all that, however, the share of small firms in military contracts remains much smaller than that they have in the country’s total industrial output. For example, small firms (under 500 employees) in 1958 employed 57.1 per cent of the labour force of the manufacturing industries, [210•2 which is by far larger than their share in the total military contracts. p During the two world wars, and, to a lesser extent, in the period of the Korean war, the bulk of orders filled under subcontracts were for goods which could be manufactured by the prime contractors’ own factories. The system of subcontracts was employed for mass production of military goods through co-operation with other business concerns. For example, during the Second World War, about 30–40 211 per cent of aircraft frames (in terms of value) were manufactured by subcontractors from other industries. In the past few years the above-said type of subcontracts has been increasingly replaced by subcontracts for the development and manufacture of such assemblies and components whose production cannot be efficiently organised at factories of prime contractors; therefore, they are manufactured at specialised factories under a subcontract. The manufacture of modern types of sophisticated military equipment objectively demands

detailed specialisation and broad co– operation in military production, which has led to a considerable spread of the subcontract system. p Detailed specialisation and wide co-operation may be considered an achievement in the organisation of military production in the USA. The Pentagon’s prime contractors are doing business on a wide scale with specialised factories of various industries which supply them with large components, assemblies, units, parts, raw materials, stores and other goods required for the manufacture of military endproducts. This co-operation is effected in the form of multistage subcontracts, market purchases and otherwise. p The level of co-operation in military production is exemplified by the manufacture of the C-141 Air Force transport plane. The 1,000 million dollars’ order for these planes was placed with Lockheed Aircraft in 1961. A total of over 6,000 firms located in 50 states of the USA and in Canada shared in building C-141 transports. Lockheed Aircraft itself handled 38 per cent of the total value of manufacturing work, while 62 per cent was performed under subcontracts. A total of 1,200 industrial firms were direct subcontractors of Lockheed Aircraft. [211•1 In their turn, its subcontractors distributed smaller subcontracts which sometimes became three- and even four-stepped. The specialisation of many factories in military production leads to their being wholly dependent on the volume and structure of government military contracts. An increase in military contracts boosts production at these factories, and conversely, a reduction results in a slump. To lessen somewhat the dependence of arms-manufacturing 212 firms on the availability of government military contracts, work to diversify the arms industry has been under way recently, i.e., the range of products manufactured by firms is being widened by starting production of civilian goods. However, considerable obstacles stand in the way of this work due to the high-degree specialisation of the production facilities of arms-manufacturing firms and the resulting low efficiency of their use for manufacturing civilian goods, these firms lacking adequate experience in the production of goods for the free market, etc. Therefore, attempts by individual highly specialised arms-manufacturing companies to diversify and convert their production to other goods often proved futile. *** Notes [203•1] Aviation Week and Space Technology, April 12, 1965, p. [203•2] M. J. Peck, F. M. Scherer, op. cit., p. 118. [204•1] Aviation Week and Space Technology, April 12, 1965, p. 88. [206•1] In certain industries, consumer goods in particular, firms with about 500 employees are fairly big enterprises.

[206•2] W. L. Baldwin, op, cit., p. 160. [206•3] M. J. Peck, F. M. Scherer, op. cit., pp. 146–47. [210•1] M. J. Peck, F. M. Scherer, op. cit, p. 150. [210•2] Statistical Abstract of the United States, 1964, p. 780. [211•1] The Wall Street Journal, November 18, 1965. 4. THE COMPETITION BETWEEN MONOPOLIES FOR MILITARY CONTRACTS

p Private commodity producers have always regarded military supplies as a lucrative business. At the same time, the bourgeoisie continues to use state power for securing fat military orders and for shifting the burden of military spending onto the shoulders of working people. This is characteristic of all capitalist countries but is epitomised with striking clarity by the United States where military production has assumed such a tremendous scale that has never been known in the history of any country during peacetime. p Manufacturing military goods for the government, the capitalists manipulate all the levers at their disposal to gain a maximum of profit. Whatever false patriotic slogans they may use as camouflage, profit is invariably the main goal of military production. In wartime, it is true, the government exerts considerable regulating influence on the economy, but this fact does not abolish the main laws of the development of capitalist production. The capitalists make concessions only when the prevailing situation and working-class solidarity force them to retreat so as to preserve their rule, their capital accumulated by plunder and their future profits. The book The Pentagon by the American journalist Clark R. Mollenhoff gives numerous historical facts to show how the US capitalists sold the government military goods at 213 extortionate prices, lining their pockets. The machinations of monopolies over military supplies have been repeatedly debated at the US Congress. p The Temporary National Economic Committee, in its investigation of monopoly power at the outset of World War II, pointed out: "Speaking bluntly, the Government and the public are over a barrel when it comes to dealing with business in time of war or other crisis. Business refuses to work, except on terms which it dictates. It controls the natural resources, the liquid assets, the strategic positions in the country’s economic structure, and its technical equipment and knowledge of processes. The experience of the World War, now apparently being repeated, indicates that business will use this control only if it is ’paid properly’. In effect, this is blackmail, not too fully disguised.” [213•1 When President Roosevelt appealed for more taxes in 1942, after the United States had entered the war, he was cynically answered by Lammot du Pont with these words: "I say this war doesn’t eliminate the profit incentive. War or peace, profits must obtain. ... This is a

sellers’ market! They want what we’ve got. Good. Make them pay the right price for it.” [213•2 p In the post-war period, the growth of US militarism spelled an increase of military procurement and development of corruption and all forms of graft, embezzlement, and deception of the government. p The long-continued intensified arms race and growing militarisation of the economy have led to the emergence of a close alliance between arms-manufacturing monopolies and top-ranking generals. This alliance is based on huge military contracts securing fat profits for corporations and definite gains for the military who assist them. p To lay their hands on military contracts, the biggest monopolies get in close touch with government agencies, the Pentagon in particular. As a rule, leading executives of the biggest monopolies fill the posts of Secretary and Deputy Secretary of Defence and secretaries of the three military 214 departments. For example, in 1961, Robert McNamara, President of Ford Motor Company, became Defence Secretary. The Texan millionaire William Clements intimately linked with the military industry has been recently appointed Deputy Secretary of Defence. Bribery by military suppliers of highly placed officials of the armed services who help the monopolies to get government contracts has become common practice. What is more, monopolies hire influential retired officers of high rank to take advantage of their connections in the Pentagon. p The number of former high-ranking military officers employed by industrial firms is rapidly growing. According to Senator Proxmire, in 1959, 100 big companies employed 721 former officers holding the rank of colonel and higher ranks, and in 1969, 2,072. Of their number, 1,065 former officers worked in 10 large military-industrial firms, in particular, 210 in Lockheed Aircraft, 169 in Boeing, 141 in McDonnell Douglas, 113 in General Dynamics, 104 in North American Rockwell, 89 in General Electric, etc. [214•1 p The alliance of Big Business and top brass on the basis of multimillion military contracts has provided favourable prerequisites for the use of military expenditures as a source of enrichment of arms manufacturers and some circles of the military. Senator Douglas stated in this connection: "When companies with defense contracts hire former officers of high rank to negotiate with their former fellow officers, some of whom they have promoted, the potential and actual abuses are magnified.” [214•2 p The US press reports numerous facts of rivalry and speculative deals over military contracts, in which representatives of the monopolies and the military, congressmen, governors and other official and unofficial personalities are involved. One example of such bitter and lasting rivalry is the struggle over the contract for the F-lll all-purpose fighter-bomber. Initially, ten biggest monopolies vied for this 7,000-million-dollar contract for over two years, but towards the end only two corporations—Boeing and General 215 Dynamics—were at loggerheads over it. The latter took the upper hand. The

outcome of this rivalry was the subject of heated debates and inquiry in a special governmental committee. p In this frantic competitive struggle, the bulk of military contracts are seized by a few large monopolies. As illustrated by Table 38, Lockheed Aircraft moved ahead of the biggest contractors of the Defence Department for the value of military contracts won in the period 1960/61–1969/70. In the fiscal year 1970 it accounted for 5.9 per cent of the total value of the Pentagon’s prime military contracts. Lockheed Aircraft specialises mostly in the development and production of aircraft, missile and space hardware. It is the prime contractor in the development and production of Polaris and Poseidon missiles, as well as Agena carrier rockets. It is also the biggest supplier of C-130 and C-141 Air Force transport jets and other aircraft. In 1965, Lockheed Aircraft won contracts worth several thousand million dollars for the development and manufacture of the C-5A transport jet for the Air Force. The firm has also won a large order for helicopters. In the period 1960/61–1966/67, military supplies accounted for 88 per cent of all its marketed products. p General Dynamics, for the total volume of contracts in the period 1960/61–1969/70 ranked second and in 1967/68, first among the biggest Defence Department contractors. In the fiscal year 1970, its share in the Pentagon’s total contracts was 3.8 per cent. It manufactures F-lll all-purpose fighters, Red Eye and Tartar ground-to-air guided missiles, ICBM launching units, submarines and cargo vessels, reequips B-52 bombers, carries out research and development in nuclear and space technology, etc. Military supplies accounted for 67 per cent of all its marketed goods in the period 1960/61–1966/67. p General Electric received from the Defence Department between 1961 and 1970 fiscal years 11,176 million dollars’ worth of contracts, placing third in the list of leading DOD contractors. This accounted roughly for one-fifth of all its marketed goods over the above-said period. General Electric supplies aircraft engines, machine-guns and aircraft cannons, control and guidance systems, electronic instruments and communication equipment Moreover, it has a share in 216 217 218 numerous contracts for space and missile systems and assemblies, as well as for nuclear engines for ships. p McDonnell Douglas, the fourth biggest contractor of the Defence Department, carries out military research and development, builds F-4 and F-15 aircraft, various missile systems, ground equipment for space systems, electronic equipment, parts for airnavigation equipment; develops and manufactures equipment for radar reconnaissance and information systems, and handles other work for the Pentagon. Military supplies accounted for 75 per cent of all its sales in the period 1960/61–1966/67. p Boeing ranks fifth in the list of the Pentagon’s biggest suppliers. This company is its main contractor in the development and production of the Minuteman-II intercontinental ballistic missile, and is the biggest supplier of transport jet aircraft. NASA placed with Boeing 25 contracts worth a thousand million dollars for the production of the first stage of Saturn-5 carrier rockets. In the period 1960/61– 1966/67, military supplies accounted for 54 per cent of all its market sales.

p United Aircraft is the biggest supplier of engines for combat and civilian aircraft. It manufactures helicopters, airplanes, radar systems, control and guidance systems, and is involved in military research and development. Military supplies account for 57 per cent of its total marketed products. [218•1 p The rivalry of the monopolies over military contracts is mostly due to their chase after" high profits. As a rule, the profit rate of arms manufacturers, even according to official statistics, is notably higher than the average profit rate of the 500 large US industrial companies combined (see Table 39). p In this table the average rate of profit is calculated as the ratio of net profit (after taxes) to invested capital. These data notably understate the actual rate of profit, particularly of arms manufacturers. The point is that the latter, by various machinations and, in particular, taking advantage of shortcomings in the operating system of payments for military supplies, largely overstate their production 219 Table 39 Average Rate of Profit of the Biggest Military Contractors and the Biggest Industrial Corporations 1657 1960 1962 1964 1965 1967 15 biggest military contractors .......... 17.2 11.0 13.1 13.9 16.2 15.3 500 biggest industrial corporations ......... 11.4 9.1 8.9 10.5 11.8 11.7 Sources: Fortune, July 1958; July 1961; July 1963; July 1965; July 1966; July 1968. outlays, thereby concealing and understating their actual profits. A sizable proportion of investments in arms corporations is made out of government funds. For example, a survey of the activities of 13 big contractors of the Defence Department in the period 1957–61 indicated that they had used government property worth 1,539 million dollars while their own property was worth 1,463 million dollars, i.e., less than the entire functioning capital of these companies. [219•1 Therefore, when the rate of profit is taken to be the ratio of declared profit to total capital investments (including government investments) this also understates substantially the rate of profits of military suppliers. p The progressive US economist Victor Perlo, in the book Militarism and Industry, discusses in detail machinations of monopolies over military contracts; he adduces much conclusive evidence that the actual rate of profit of military suppliers is far in excess of its declared rate, and exposes the interest and role of these "death pedlars" in a continued arms race and exacerbation of the international situation. p According to Perlo’s estimates, the actually reported and hidden profits of military suppliers account for 18 per cent of their total sales. [219•2 Taking account of this percentage and the total military procurement it may be calculated that in 220 1966/67 the Pentagon’s purchases alone gave military suppliers approximately 6,500 million dollars in profits. p Table 40 presents the absolute size and rate of profits of the Pentagon’s biggest suppliers.

p The Vice Admiral H. G. Rickover, US Navy, said that "in the past several years I have seen profits on defence contracts go higher and higher”. According to him, profits on military contracts add up to about 4,500 million dollars a year. [220•1 The US Professor Murray L. Weidenbaum, a known expert in military economics, estimated that in the period 1961–65, the actual rate of net profit of six big arms-manufacturing companies was 17.5 per cent, while that of six equally large companies with no military contracts was 10.6 per cent. [220•2 The high rate of profit of arms-manufacturing companies is also evidenced by a special inquiry carried out by the US General Accounting Office. Its findings which aroused a violent reaction within the Pentagon and the aerospace industry were obtained by an examination of 146 recently completed military contracts worth a total of 4,256 million dollars. Given below are the results of the inquiry by the General Accounting Office into the reported and actual rates of profits of arms-manufacturing firms before taxes (per cent). Actual rate according to Index Reported rate findings of the General Accounting Office Profit to cost ratio .......... 3.9 6.9 Profit to total investment ratio .... 10.2 28.3 Profit to own investment ratio ..... 19.8 56.1 The table shows a glaring gap between the reported and actual rates of profits. In 1969, the rate of profit (before taxes) of all corporations of the US manufacturing industries was 20.1 per cent (in relation to joint-stock capital). The figure for military suppliers, however, was 56.1 per cent. 221 Table 40 Profits of the Biggest DOD Contractors 1964 1965 1967 Company Value of military contracts, mil. dollars Net profit, mil. dollars Rate of net profit, per cent Value of military contracts, mil. dollars Net profit, mil. dollars Rate of net profit, per cent Value of military contracts, mil. dollars Net profit, mil. dollars Rate of net oroht, per cent Lockheed Aircraft Corp ...... 1,455.4 45.1 18.9 1,715.0 53.7 19.3 1,807 54.4 15.5 General Dynamics Corp ...... 986.7 42.6 14.2 1,178.6 49.2 17.4 1,832 57.0 17.0 General Electric Corp ....... 892.6 237.3 12.4 824.3 355.1 16.9 1,290 361.4 15.4 North American Aviation, Inc. United Aircraft Corp ....... 1,019.5 625.4 49.3 29.0 16.7 9 2 745.8 632.1 45.8 49.0 14.4 13 4 689 1,097 68.3 57.3 11.0 12.4 Boeing Co ............ 1,365.2 45.3 14.8 583.3 78.2 21.1 912 83.9 11.2 Grumman Aircraft Engineering Corp. . . .... 395.6 10 7 14 8 353 4 20 9 23 3 488 21 4 16.4 Sperry Rand Corp ........ 373.9 28 2 7 3 318 4 22 0 5 7 484 53.9 11.4 476.2 37.1 10 6 315 6 30.5 10 5 290 36.6 11.6 General Tire and Rubber Co. . . Raytheon Co .......... 364.4 253.6 36.9 8.2 14.0 7.6 302.0 293.4 42.6 11.0 14.2 8.8 273 403 32.1 28.6 9.1 14.2 > 5 o 11 c ’-a so O D O O p Sources: Fortune, July 1965; July 1966; July 1968. p IS 222

p In the opinion of the General Accounting Office these high profit rates are largely due to the system of advance payments, which are, in effect, interest-free loans. In the period 1964–70, the total sum of advance payments grew from 3,300 million dollars to 10,000 million. Advance payments enable contractors to use their clients’ money to compensate up to 90 per cent of total outlays. The high rate of military profits is also secured by the use of government enterprises and equipment put at the disposal of contractors. In 1967, the total value of government industrial property was equal to 2,600 million dollars, 84 per cent of which was used by 15 companies, 9 of them the biggest military contractors. p The US ruling circles regard the existing organisation of military production as an effective one. And small wonder. Indeed, it is precisely to meet the economic and political interests of the financial oligarchy that the US Administration annually channels huge sums into the development of military production, uses the military budget as a means of implementing state-monopoly measures to accelerate the economic growth rates and mitigate the antagonistic contradictions of capitalist reproduction. p However, a detailed analysis of the organisation of military production and occasional critical publications on the subject attest to the existence within this system of essential defects, which reduce the efficiency of using the US military-economic potential. These include, above all, the use of military contracts to meet the selfish interests of private corporations, conversion of military production into a source of fabulous profits for the military-industrial complex, which resorts to various machinations to win as many government defence contracts as possible and to supply military goods to the government at exorbitant prices. p This is illustrated by the findings of a special inquiry into missile purchases held by the Senate Permanent Subcommittee on Investigations headed by Senator John L. McClellan, which came to be known in Washington as the "profit pyramiding" inquiry. [222•1 In 1945, the Department of the Army signed a contract with Western Electric Company for the development and production of Nike-Aj ax and Nike– 223 Hercules guided missiles that could track and destroy enemy bombers. The company subcontracted much of the research and development involved to the Bell Telephone Laboratories, and more than 70 per cent of the work to 17 different firms which, in their turn, engaged scores of other firms as subcontractors. The total cost of the development (1945–52) and line production (1952–63) of Nike-Aj ax and NikeHercules missiles added up to about 2,500 million dollars, in which production costs accounted for 1,400 million dollars (57 per cent). The McClellan Committee found that Western Electric as the prime contractor had spent from its own funds only 359,300,000 dollars (the remaining sums going to production costs and subcontractors’ profits) and derived profits out of proportion to its actual work, at a rate based on the total value of the contract, including subcontracted work. As a result, its profits equalled 7.9 per cent of the total value of the contract and 31.3 per cent of its own outlays. Its subcontractors acted likewise in relation to their subcontractors. This led to the piling up of profits into a "profit pyramid”. Profits were derived on one and the same work both by the subcontractors and the prime contractors, the latter even having a gain on the profits of their subcontractors.

p It goes without saying that this organisation of military production and payments under military contracts resulted in a considerable overstating of prices of military supplies, thereby reducing the effectiveness of US military expenditures. As stated above, over the past few years, the US Administration has taken vigorous steps to eliminate these shortcomings, but these are hardly to be crowned with full success. p In a situation where roughly 90 per cent of armaments is manufactured by private corporations, the government, unable to regulate military production directly, regulates it by indirect means (distribution of military contracts, direct subsidies, tax reliefs and other privileges, etc.). Absence of centralised planning of military production and the selfish interests of private corporations add to complicate the problems facing the government in using the existing military-economic potential in peacetime and particularly in wartime. For the same reasons, the Administration is unable to ensure a rational use of the country’s productive forces and 224 to secure an optimum utilisation of the material, manpower, and financial resources employed for military purposes. p These and other flaws in the organisation of military production result in a decreased efficiency of military activity both from the viewpoint of government finance and the use of economic potential. Discussing the influence the organisation of military production has on the efficiency of US military development, it should be stressed, that the tremendous economic potential of the USA, and the striving of private corporations to wax fat on military contracts have combined to form a permanent military sector in the US economy which is capable, naturally along capitalist lines, to meet the colossal demand of the US armed forces. Moreover, there is stiff competition between corporations for government military contracts. This points, first, to the existence of a powerful functioning material production basis for an uninterrupted and prompt satisfaction of the increasing military demand and, second, to the US Administration’s ability to pick the best of the rival suppliers. *** Notes [213•1] Hyman Lumer, War Economy and Crisis, New York, 1954, pp. 79–80. [213•2] Ibid., p. 79. [214•1] Congressional Record, March 20, 1969, p. 7207. [214•2] Fred J. Cook, Juggernaut: The Warfare State, cited in The Nation, October 28, 1961, p. 305. [218•1] R. E. Lapp, op. cit., p. 186.

[219•1] American Economic Review, May 1968, p. 429. [219•2] Victor Pcrlo, Militarism and Industry. Arms Profiteering in the Missile Age, p. 51. [220•1] Economic Notes, June 1968, p. 7. [220•2] American Economic Review, May 1968, pp. 434–35. [222•1] 7he Progressive, July 1962, pp. 10–14. CHAPTER VII SOCIO-ECONOMIC IMPLICATIONS OF MILITARISM IN THE USA 1. ECONOMIC IMPLICATIONS

p The imperialist powers make huge investments in military work, mostly in pursuance of their military-political objectives. In addition, their ruling quarters use military expenditures as a major lever for state-monopoly regulation of economic development. "State-monopoly capitalism results in an unprecedented rise of militarism,” the CPSU Programme says. p As far back as the nineteen-thirties, the USA began spending big government funds on various measures to curb economic crises. The use of government finance for state– monopoly measures in the overall strategic interests of the ruling classes assumed a particularly wide scope after the Second World War. The aggravation of the general crisis of capitalism, exacerbation of the antagonistic contradictions of capitalist reproduction, the high level of development and the degree of concentration of production, as well as the fear of a recurrence of the economic disasters of the thirties induced the US Administration to interfere widely in national economic affairs in the post-war period. The cornerstone of the post-war economic policy of the Administration is the theories of the British economist John Maynard Keynes and his followers. p While in the thirties the economic and financial measures taken by the US Administration were mostly aimed at leading the national economy out of its critical condition, after the Second World War the main line of its economic policy 226 consisted in efforts to prevent economic crises, to maintain a stable market situation. p The Economic Report of the President of January 1964 says, for example, that "the Federal Government must adjust its programs to complement private demand". [226•1 The need to implement government measures to support economic development has been repeatedly emphasised in the President’s messages on the budget. For example, the message on the budget to Congress of January 24, 1966, says that the requisite increase in budgetary appropriations is financed in such a way as to maintain economic stability.

p The implementation on a wide scale of state-monopoly measures to preserve and strengthen the capitalist system is another reason for increased federal budget expenditures. What is more, government expenditures grow much more quickly than revenues, so the budget deficit has come to be almost chronic. p Until the thirties, it was believed that large government expenditures and a budget deficit had an adverse effect on the country’s economic development. Later, however, bourgeois ideologists, to fit the new demands of the capitalists, evolved a new theory which maintains that government spending is not a burden, but on the contrary a vital element of the economy, which complements private business and is the chief remedy against grave depressions. p Keynesians and Neo-Keynesians maintain that the traditional fiscal theory which states that a balanced budget is a prerequisite of economic and financial stability is outmoded. In their writings they propagate the idea that it is unnecessary to have a balanced annual budget. In their opinion, in years of depression deficit financing must be effected to stimulate economic development, while in years of high business activity it is necessary, on the contrary, to secure an excess of budget revenues over budget expenditures in order to have a well-balanced budget for the entire cycle of economic development. Advocates of the economic policy pursued by the US Administration over the past few years have taken further steps in this direction. They affirm that now the 227 budget may have a deficit as long as production is below the level attainable at an unemployment rate of not over 4 per cent. This depends allegedly neither on time nor on the stage of business activity. p As a result, the US federal budget has a deficit both in years of crisis and in years of economic prosperity. Of the 27 post-war budgets 18 had a deficit. Over the past few years, the sum of budget deficits alone has often been larger than the total federal budget expenditures in the twenties and thirties. Moreover, account should be taken of the fact that the actual budget deficit exceeds, as a rule, the level envisaged in the draft budget. For example, under the draft budget for 1967/68 the federal budget was to have a deficit of 8,100 million dollars, whereas actually it amounted to 25,200 million dollars. [227•1 p In the thirties, government measures to curb the crisis consisted mostly of subsidies and various public works, whereas in the post-war years, state-monopoly measures were associated in the main with military development, which is one of the causes of the growth of US militarism. p The well-known US economist John Kenneth Galbraith writes that it is precisely the expenditures on the arms race that "account for most of the expansion in the role of the Federal Government in the economy. In the decade of the thirties, expenditures for national defense (excluding those for veterans and interest) amounted to between 10 and 15 per cent of the administrative budget. In the first half of the sixties, they were between 55 and 60 per cent....

p “If a large public sector of the economy, supported by personal and corporate income taxation, is the fulcrum for the regulation of demand, plainly military expenditures are the pivot on which the fulcrum rests.” [227•2 p The military economy has become a sphere of the most manifest coalescence and interpenetration of the monopolies and the government machinery as is evidenced by the formation and operation of the military-industrial complex in 228 the USA and other imperialist states. This complex which is the product of a union between militaryindustry firms, the military and the government bureaucracy, is a system through which the capitalist states secure, above all, the material equipment of their armed forces; regulate the scale, structure and geographical distribution of the arms industry; stimulate the advancement of military technology and implement various measures preparatory to economic mobilisation in a war emergency. For these purposes, the government circles give the military-industrial complex financial and other assistance, various privileges and stimulate its activities. p The military-industrial complex exerts growing influence on the economic, political and spiritual life of bourgeois society. The material foundation of the “complex” is provided by government military spending. Therefore, the militaryindustrial complexes existing in different imperialist countries go out of their way to step up the arms race, prevent international detente, encourage militarism. p The military-industrial complex has developed to its utmost in the United States where it has become a veritable "state within a state”. The dangerous consequences of its activities are so evident as to cause growing concern among the public at large and even within the US Congress. p An intimate union between arms-manufacturing companies, government officials and the military exists in several other NATO member states, Britain and the Federal Republic of Germany in particular. It is also being revived in Japan, which has stepped up its military activities in the past few years. p There are tendencies towards the consolidation and expansion of specific alliances between arms-manufacturing companies of the capitalist states. This process assumes a variety of forms. Within the NATO framework, for example, it takes the form of intergovernmental agreements on joint development and production of arms and military equipment. Among such agreements is one for the production under American licences of the F-104G fighter in which West German, Italian, Belgian and Dutch monopolies have a share; the development and production of the Jaguar training and combat plane by aircraft-building firms of France and 229 Britain; the joint production of the US Hawk missile (under US licences) by companies of Belgium, France, the FRG, Italy and the Netherlands. This "arms integration" meets with many obstacles, in particular differences between NATO member states. However, since independent production of modern sophisticated and costly armaments is often too difficult and unprofitable for individual countries, their ruling circles finally prefer to “co-operate” in the arms race.

p Military production under capitalism is internationalised also as a result of the widening export of capital, the expansion of the activities of international monopolies. The US monopolies manufacturing armaments set up their subsidiaries in other countries. The super-monopoly International Telephone and Telegraph, which is one of the biggest suppliers of the Pentagon, owns Standard Telephone and Cables Company in Britain and Standard Electric Lorenz Company in the FRG which are also involved in the manufacture of military goods. Such large military-industrial corporations of the USA as General Electric, Lockheed Aircraft, Boeing, United Aircraft and many others have a large interest in the arms-manufacturing companies of Western Europe. [229•1 p In this way, the conversion of huge military expenditures into a major form of statemonopoly regulation of the capitalist economy and the basis for the military-industrial complex has become the mainspring of modern militarism. p The role of military expenditures in state-monopoly regulation of the economy is evidenced by data on the share of military procurement in the total federal government purchases of goods and services presented below (see table on page 230). p Thus, military purchases account for about four-fifths of federal purchases of goods and services. p The US ruling circles and apologists of the bourgeoisie regard military expenditures as an effective means of stimulating economic development and preventing crises. In keeping with Keynes’s conceptions, they consider military expenditures the most important form of government regulation of the economy, the most effective instrument for stabilising 230 Total federal procurement of Military procurement of goods and services Year goods and services, thous. mil. dollars Thous. mil. dollars Percentage to total federal procurement 1950 18.4 14.1 76.7 1955 44.1 38.6 87.5 1960 53.5 44.9 84.0 1965 66.9 50.1 75.0 1966 77.8 60.7 78.0 1967 90.7 72.4 75.1 1968 98.8 78.3 79.9 1969 98.8 78.4 79.3 1970 96.5 75.1 77.8 1971 97.8 71.4 73.0 Source: The Handbook of Basic Economic Statistics, October 1972, pp. 224–25. the market situation. Many US economists allege that it is possible to secure eternal “prosperity” with the aid of large military outlays. For example, Alvin H. Hansen writes that "growing military expenditures, sufficient to offset the eventual decline in private capital outlays, might, indeed, give us an almost indefinite period of high employment". [230•1 Life itself and the development of the capitalist economy demonstrate the insolvency of these vulgar theories, disprove the idea that militarism ensures eternal prosperity and a stable economic situation. p What is the actual impact of the arms race on economic development, the general course of capitalist reproduction? This can be revealed by a concrete analysis of the country’s economic development over a specified period.

p From the aspect of the impact military industrial activity has on the economic growth rates in the capitalist states, the following possible situations may be encountered: p 1. If government military-economic work and the methods of financing and supporting it contribute in a given period to an increase in actual solvent demand, to the scope of using 231 existing and building new productive capacity, they may temporarily speed up the rates of economic growth. p 2. If government military-economic work and the methods to finance it fail to contribute to an expansion of the market and functioning productive capacity, to an increase in the relative and absolute scale of military production, they are not, of course, a factor stepping up the rates of economic development, even if temporarily. p 3. If government military-economic work does not contribute to an increase in solvent demand and is effected by slowing down or halting the growth rates of civilian production and consumption, let alone curtailing them, while the methods used to finance this work derange economic life and the normal course of social reproduction, then military demand, depending on its scale and specific conditions, may either retard economic growth rates or even reduce total production. p Military expenditures have an obviously adverse effect on the economic development of advanced countries with no idle productive capacity and material resources to spare. For example, one of the main causes of the slow development rates of Britain’s economy and her grave economic and financial difficulties is precisely her military effort. As for highly developed capitalist countries with idle productive capacity, surplus capital and manpower reserves, there, within a definite period, in particular during a sharp increase in military activity, the arms race may be conducive to greater production and employment, and acceleration of economic growth rates, because at this time, an inflow of military contracts results in greater loads on existing military and related industries and in building new capacity. The USA provides an example in point. In the thirties, the US economy was marking time, the total industrial output over all those years, barring 1937, being below that of 1929. The Second World War led the economy out of its stagnant condition and gave a spur to its development due to the tremendous military demand and the expansion of military production to cope with it. The role of military demand in the development of the US economy during the Second World War is illustrated by Table 41 which shows that in that period the rate of increase in 232 federal spending on military goods and services was far ahead of that in the country’s gross national product. From 1939 to 1944, the gross national product increased 80 per cent at a fixed price rate, whereas federal military purchases increased 51.1 times over. This fact and the resulting considerable increase in the share of military supplies in the gross national product (from 1.6 per cent in 1939 to 45.6 per cent in 1944) indicate that the growth of production in that period was mainly due to the increased output of military industry.

Table 41 Variations in GNP and Federal Military Expenditure (in 1963 prices) GNP Federal military expenditure Year Mil. dollars Increment from previous year, per cent Thous. mil. dollars Increment from previous year, per cent Percentage to GNP 1939 223.2 3.5 1.6 1940 242.0 108.4 6.2 177.1 2.6 1941 281.8 116.4 32.7 527.5 11.6 1942 323.2 114.7 105.4 322.3 32.6 1943 364.4 112.7 159.5 151.3 43.8 1944 391.1 107.3 178.4 111.8 45.6 p Source: Economic Report of the President Transmitted to the Congress, January 1964, pp. 208–09. p The methods of financing used in the Second World War made for an increase in the nation’s total solvent demand. During the war, more than a half of the US military outlays were defrayed out of loans, which led to an unprecedented growth of government debt: from 48,500 million dollars late in 1940 to 259,100 million dollars at the end of 1945. This tremendous sum was distributed among banks, insurance companies, savings banks, individuals, etc. p The floating of such huge loans was made possible by the specific conditions of reproduction during wartime. The harnessing of the economy to the war effort, the conversion of the government into the main customer for the greater part of industrial goods, the unprecedented growth of government 233 military demand all required government regulation of the economy, essential restrictions on freedom of business activity. Since the burden of financing the development of military production by corporations was shifted onto the federal budget, while business activity in the civilian industries was substantially restricted by government regulation of the use of productive capacities, raw materials, manpower and other production facilities, a good deal of surplus loan capital awaiting investment accumulated within the country. Under these conditions, it was not difficult for the government to distribute loans to meet budget deficits, the more so as investment of surplus loan capital in government loans was a form of military financing advantageous for the financial oligarchy, since the monopolists recover after a time not only the sums loaned to the government but interest as well. p Therefore, in wartime, when the specific features of the circulation of public capital, in particular, the government financing of a sizable share of production and the inadequate taxation of capitalist profits, result in intensive accumulation of surplus loan capital, the latter flows into government loans. During the Second World War this utilisation of Table 42 Structure of Monetary Income in the USA During World War II Income 1940 1941 1942 1943 1944 1945 ( thous. mil. Total dollars 15.4 23.0 41.1 47.6 56.9 48.7 . per cent . . 100 100 100 100 100 100 Funds to meet feder– al deficit f thous. mil. dollars per cent . . 0.7 5 3.8 17 31.4 76 44.2 93 51.9 91 39.7 81 Other income at home and abroad thous. mil. dollars per cent . . 14.7 95 19.2 83 9.7 24 3.4 7 5.0 9 9.0 19 Source: National Income. 1954, Supplement to Survey of Current Business, Washington, 1954, pp. 1964–65.

234 surplus loan capital became the principal form of current accumulation of monetary capital. p The table indicates that during the war, the overwhelming share of current accumulation was used to finance budget deficits, compared to a mere 5 per cent in 1940. Funds accumulated thereby were spent by the government to meet the war requirements, which was attended by an increase in the total solvent demand, because a considerable proportion of these funds would have otherwise remained idle in conditions of wartime. p Military expenditures stimulated the growth of the US economy in the first half of the fifties as well, in particular, during the US war of aggression in Korea, when military appropriations were drastically increased, and a modern arms industry was, in effect, built up anew. In those years, the increase in the absolute total of military expenditures and the growing use of the methods of military and, in particular, deficit financing (accompanied by acquiring a share of the savings of capitalists and other segments of the population through an increase in government debt and excessive currency emission) really widened the limits of general demand in the country, providing thereby one of the boosters of economic growth. The volume of government military procurement of goods and services (in 1963 prices) grew from 20,700 million dollars in 1950 to 65,100 million in 1953, i.e., by 210 per cent, whereas the gross national product increased only 20 per cent over the same period. In 1950, the share of military supplies in the gross national product was 5.6 per cent, whereas the figure for 1953 was 14.8 per cent. [234•1 p These measures to stimulate the economy, however, were of a transient nature because for socio-economic and political reasons, military expenditures could not be increased at such rates without end. In addition, the methods of financing military-industrial activity posed the danger of economic difficulties, inflation in particular. p After the Korean war ended the US military expenditures dropped notably, remaining within 40,000–45,000 million dollars a year until 1960. In that period, the absolute output 235 of military goods continued at a relatively stable level, and their share in the gross national product was diminishing. Federal purchases of goods and services for military purposes consumed 14.8 per cent of the gross national product in 1953, 10.5 per cent in 1955, 10.2 per cent in 1958 and 9 per cent in I960. [235•1 It goes without saying that with military supplies having a diminishing share in the gross national product and their absolute volume remaining stable, military production could not stimulate the development of the US economy. p As noted above, in the sixties, particularly in connection with the escalation of the Vietnam war, the US Administration sharply increased the volume of its military procurement. In 1965/66, 5.1 million tons of military supplies were shipped from the USA to South Vietnam, which comes out roughly to 16 tons per US soldier stationed there, much more than in all previous wars. [235•2 The Vietnam war cost the United States 77 million dollars a day, of which 24 million was spent on purchases of petrol, communication equipment and other operational needs, 18 million on the pay to and upkeep of US servicemen, 18 million on ammunition and high explosives, 10 million on

the replacement of equipment and spare parts, 5 million on the replacement of aircraft, one million on military construction in Vietnam, and one million on the development of new weaponry to meet the needs of the Vietnam war. [235•3 p The substantial increase in military spending and the Fiscal year Thous. mil. dollars Rate of Increment from previous year, per cent Fiscal year Thous. mil. dollars Rate of increment from previous year, per cent 1964 51.0 1967 73.4 10.8 1965 50.9 —0.2 1968 75 2 2.4 1966 66.2 30.0 1969 82.4 9.5 Source: Aviation Week and Space Technology, February 5, 1968, p. 15. 236 growth of solvent demand involved stepped up business activity and the rates of economic growth. The impact of the Vietnam war on the US economy was particularly notable in the initial period of its escalation, i.e., in 1965/66. It was precisely in that period that the Defence Department’s financial obligations for the supply of military goods and services rose steeply, as is illustrated by the table on the previous page. p The steep rise in military contracts awards in 1965/66 was attended by a widening of the absolute and relative scale of war production. As was noted above, the expansion of military procurement caused by the Vietnam war contributed to an increase in employment and to a still greater militarisation of the US economy. In 1966/67, the national average employment rate grew 5.6 per cent from 1964/65, whereas the labour force involved in military production increased 34.4 per cent. Over the period, the total number of employees at government and private arms-industry enterprises increased by 1,045 thousand, which accounted for about 23 per cent of the total size in civilian employment. [236•1 These data evidence that the growth rates of employment in war industry were much faster than those of total employment in the initial period of the escalation of the Vietnam war. This, naturally, had its analogy in the output of goods, too. Consequently, military contracts in that period became an important stimulus for widening the scope of production. In 1966, the US industrial output was 9 per cent above that in 1965, which was appreciably higher than the growth rates of industrial output in previous years. [236•2 According to evaluation by the Federal Reserve Bank of New York, the rapid growth of defence requirements was the largest factor shaping the course of economic activity in 1966. [236•3 p However, the sharp decline in the rates of increase in military contracts awards in later years resulted in the loss of their stimulating effect on the economic growth rates. But they evidently retarded somewhat the incipient decline of business activity in the country. In 1967, industrial output 237 grew only one per cent from 1966, i.e., its growth rates fell sharply. [237•1 In 1969, another crisis of overproduction set in, leading to a curtailment of production, an increase in unemployment, bankruptcies, a decline in share prices, etc. p The degree of influence a nation’s military industrial activities have on economic development depends on their share in total industrial output, the relation between changes in the scope of these activities and changes in the national economy as a whole.

If the share of war production in a country’s total output is big enough, the impact of military expenditures on the economy will be great, and vice versa. p When the rates of economic growth are accelerating on the whole, while militaryindustrial activity is growing faster than the total civilian production, military expenditures contribute to a temporary acceleration of the economic growth rates, as was the case in World War II, the Korean war, and the Vietnam war. With the reverse correlation between the rates of economic growth, let alone cases where war production fails to compensate for a decline in civilian industry, the military sector holds back the rates of economic growth, as was the case after the end of the Korean war until the early sixties, and may sometimes result in an absolute decline of production, as in Germany at the end of the Second World War. p The Impact of Militarism on the Cyclic Course of Capitalist Reproduction. In an effort to whitewash militarism, apologists of imperialism maintain that the arms race is a remedy against crises and extoll in every way the indirect economic benefits to be derived from it. For example, Charles J. Hitch and Roland N. McKean write in this connection: "When government spends such an amount for national security it tends to buoy up total spending. The existence of this demand makes a deficiency of total demand less probable. Moreover, it facilitates the application of other antideflationary measures, like the injection of additional money into the economy... . The defense effort is a component of total demand that will not melt away even if people decide to reduce their personal spending... . We do not have to have defense programs in order to avoid unemployment (or to 238 have inflation). Nevertheless, given the existing situation, a large security budget is an anti-deflationary force. This is one of the indirect effects [of military spending on the economy—Author] that should be recognized.” [238•1 p Experience indicates that military-industrial activity does not change the general economic laws of capitalism, in particular, the cyclic character of social reproduction. It shows at the same time that where the absolute and relative scope of military-industrial activity widens considerably and war production becomes a permanent component of the economy, military expenditures may have a notable impact on the capitalist cycle. p In order that the impact of military-industrial activity on this cycle may be examined, one should study above all the regularities of military production itself. In its development, the following basic characteristics differing from those of civilian production are to be found: p 1. In contrast to the civilian industries whose products are marketed upon manufacture, private companies embark on the manufacture of specific military commodities (missiles, airplanes, ships, tanks, etc.) after their sale, i.e., after winning a government contract for the delivery of armaments of a specified quantity and quality. Lenin wrote: "When capitalists work for defence, i.e., for the state, it is obviously no longer ‘pure’ capitalism but a special form of national economy. Pure capitalism means commodity production. And commodity production means work for an unknown and free market. But the

capitalist ‘working’ for defence does not ‘work’ for the market at all—he works on government orders, very often with money loaned by the state.” [238•2 p 2. The government is the sole buyer of military goods. Although military purchases are made by numerous procurement agencies, while a share of military supplies, under a system of subcontracts, is handled only by individual private companies, the government is the final purchaser of manufactured military goods (excluding a certain part of arms exports). This fact leaves its imprint on military production in 239 the sense that it is precisely government demand that determines its scale, structure and trends. p 3. The structure and volume of government demand for military goods change much more quickly than market demand for products of any civilian industry due to the more rapid development of military technology and a considerable speed-up in its obsolescence, changes in military policy and strategy, in the international situation, and other factors. Therefore, military production is distinguished by relatively greater uncertainty of development prospects, as well as by quick and notable changes both in its volume and structure. p 4. With the increased claims on the quality of military goods and the invention of incgsasingly sophisticated weapons systems, the’competitive power of firms involved in military production depends mostly on their capacity to manufacture technologically intricate products, the availability of highly qualified personnel, their experience in the performance of military contracts, and progress in military research and development, as well as the strings they have in the Pentagon and Congress. p 5. Prices of military commodities are not conventional free market prices, but are mostly negotiated between the government and the monopolies. The absence of an open arms market resulting as a rule in non-competitive price formation is used by military suppliers to inflate prices. p 6. The US Administration plans military production with a view to the strategic objectives of US imperialism and armed forces development programmes. The Defence Department conducts private orientation conferences with leading military-industrial firms to inform them of contemplated amendments in the range and volume of government military purchases. As far back as 1950, Congress passed the Defence Production Act which gave the President and his Administration broad powers to widen and stimulate military production development, establish priorities in strategic raw materials and equipment distribution, and make stockpiles, control prices, etc. In this way, the USA maintain its military-economic potential prepared for mobilisation. p Thus, the development of military production, its scale and variations are governed by its own specific laws rather than by general cyclic reproduction or private market demand. 240

p The impact of military production with its developmental distinctions on general cyclic reproduction varies primarily in proportion to its share in the national economy. For example, during the Second World War, when the government’s war economic activity reached a tremendous scale with almost a half of the gross national product being used for military purposes, war production influenced the cycle to a decisive degree. War production regulated and directed by the government, the gearing of the entire economy to the war effort led to a situation where the economic development was governed on the whole mostly by the specific laws of war production rather than the basic laws of cyclic reproduction. The dominating role of war .production during the Second World War resulted in a derangement and repeated disruption of the normal production cycle. p As noted above, in the post-war period roughly 10 per cent of the gross national product was consumed by the military establishment. It need not be argued that military procurement on this scale cannot produce the decisive effect on the production cycle. In peacetime, military expenditures fail to provide an alternative to the cyclic character of economic development, as is evidenced by the overproduction crises which hit the USA in 1948–49, 1953–54, and 1957–58. After mid-1969, the US economy was in the throes of a regular cyclic crisis of overproduction although the USA was continuing its war in Indochina and its military spending soared. The government, however, may stave off or abate the severity of an incipient crisis by manipulating its military outlays. p In order that the impact of military spending on the phases of the production cycle may be defined more accurately, one should find criteria that would more accurately indicate the moment it has the greatest and most immediate impact on business activity. As is known, the scope of military-industrial work finds its concentrated expression in the spending half of the federal budget, specifically in various budget items. To determine which of these items conforms most to the above-mentioned objectives, it is necessary to refer to the main items of the US federal budget. p New obligational authority—the sum of appropriations annually endorsed by Congress both for the budget as a whole and for individual departments and agencies, within 241 the limits of which new financial obligations may be incurred and discharged, either directly or under a special legislative permit. As a rule, these obligations must be incurred within a given fiscal year, but in certain cases, particularly when financing construction, research and procurement programmes, they may be incurred for longer periods. p New obligational authority is usually granted in the form of appropriations enabling concrete financial obligations to be incurred and discharged. A part of new obligational authority takes the form of contract authority but payments thereunder are subject to special congressional approval. Any part of new obligational authority not used within a specified period is cancelled. New obligational authority can be used in the future only if renewed by Congress. p New obligational authority is granted annually when endorsing the budget. New autherity and that which is a backlog from past years make up the total obligational

authority for a given fiscal year. This is sometimes termed Direct Budget Plan in US publications. p Obligational authority is a title to incur financial obligations for the purchase of various goods and services needed by a given department or agency for discharging its functions. Invested with the right to incur obligations, government departments and agencies, the Department of Defence in particular, undertake to pay their suppliers specified sums for the delivery of specified goods and services. The actually signed obligations are known as obligations incurred. They may take the form of short-term obligations to pay civilian and military personnel, of contracts for military equipment deliveries, the construction of military projects, etc. Obligations incurred are considered discharged after suppliers have been paid in cash or in cheques. Actual payments under obligations incurred within a given fiscal year are made both in that year and in later years on progress in the performance of a specific contract. Actual payments for goods and services supplied come under the “expenditure” item of the budget. At the same time, a part of expenditures is defrayed under obligations incurred in previous years, another part, under those incurred within a given fiscal year. p When discussing the budget, Congress annually approves separately the volumes of new obligational authority and 242 new spending authority. Though not identical in size, as a rule, they are very closely interconnected. New obligational authority determines in the main the volume of obligations to be incurred by departments and agencies with suppliers of goods and services. In their turn, obligations actually incurred are potential expenditures which vary in size with the volume of the former. p There is a definite lag between changes in the volume of budget items discussed. For example, changes in the volume of new obligational authority for a given fiscal year do not necessarily result in a corresponding change in the volume of obligations incurred and the total of actual expenditures in that year. The point is that changes in the volume of new obligational authority in a given fiscal year may affect the incurrence of obligations in the subsequent two years or more, while actual spending may be affected even for a longer period. This is attributable to the fact that, as was pointed out above, there is a lag on the one hand between the granting of new obligational authority and the actual incurrence of obligations and, on the other hand, between the latter and the spending of sums to discharge them. p The actual scope of federal military procurement in the past may be assessed on the basis of expenditures alone but one must be in possession of data for all of the above listed budget items to analyse the current, let alone future, military work. Of these, data on total obligational authority or, more specifically, data on obligations incurred, more accurately show when military work has the greatest impact on the economy. p It is precisely after government obligations are incurred with military suppliers under contracts or otherwise that military-industry work affects the economy most. In this period, industrial firms committed under military contracts provide themselves with requisite production facilities, raw materials and stores, manpower, etc. The incurrence of

a financial obligation affects the activity not only of prime contractors but also of subcontractors involved directly or indirectly in the performance of the contract in question. p There is a lag between the time a government financial obligation is incurred by the Department of Defence or another government agency with the supplier of military goods 243 and services and the time it is discharged, which varies with the term of the contract involving the obligation. This lag ranges from short periods (for pay to servicemen, wages and salaries of civilian personnel) to long (orders for military equipment, military construction, etc.). p During the Korean war, it was estimated that the lag between ordering and delivering typical military items varied from six months for uniforms to 15 months for tanks and to over two years for combat aircraft. The lead time for procurement of aircraft for the Vietnam war was estimated by the Department of Defence at 18 months. The estimate for ammunition was six months. [243•1 The US economists Harvey Galper and Edward Gramlich, using a modelling technique to estimate the lag between ordering and paying for military equipment, established that on the whole about 8 per cent of all Defence Department orders were repayed, i.e., listed under “expenditure” items within a quarteryear of being awarded; up to 20 per cent within 6 months; up to 35 per cent within 9 months; up to 49 per cent within one year; and up to 81 per cent within two years. [243•2 p As evidenced by the data adduced, the lag between the incurrence of a financial obligation with military suppliers and its actual discharge is quite considerable. Therefore, the US budget has a discrepancy (sometimes considerable) between the quantitative expression of military work under the item "obligations incurred" and under the “expenditures” item. p Obligations incurred illustrate the scale of prospective military-industry work, indicating more accurately the time of its performance and greatest impact on the economy, whereas expenditures show the scale of accomplished work in the production of military goods and services. Therefore, data on expenditure used for an analysis of the impact of military procurement on the economy in a given period of spending may be misleading. This is particularly true of periods of drastic fluctuations in the rate of military contracts awards, which are not immediately mirrored in budgetary data on military outlays. For example, in 1965/66, the Defence Department incurred financial obligations totalling 244 some 67,000 million dollars, 30 per cent more than in 1964/65. Over the period, however, expenditures increased only 17 per cent, totalling 54,400 million dollars, i.e., 12,600 million dollars less than the sum of all obligations incurred. In 1966/67, obligations incurred grew by 6,000 million dollars to total 73,000 million, while expenditures increased by 13,100 million dollars to total 67,500 million. As pointed out above, federal military activities reached the peak of stimulating effect in 1966, when the rate of government contracts awards was at its height, whereas 1967, a year of record spending, saw the onset of an economic depression. A roughly similar situation was in evidence during the Korean war. It may be inferred from the above-said that the impact

of federal military activities on the capitalist cycle should be assessed from data on financial obligations incurred in corresponding cycle phases. p In view of the stimulating effect military contracts have on the economy, the US Administration takes steps to increase their volume in periods of critical slumps in production. For example, the amount of military orders was increased in an effort to curb the crises in 1948–49, 1957–58, etc. This slowed down, of course, the rates of critical decline in business activity in those years. p When the rate of military contract awards notably increases in the upward phase of the cycle this may be a factor sustaining this rise for a longer period. For example, this rate sharply increased in 1965/66 when the US economy was on the upgrade. The claims of the Vietnam war might have made for a definite lengthening of this upward trend. Once the hectic rise in military contracts and the stimulus it gave to business activity were no longer there, military contracts could do no more than slightly offset an incipient cutback in economic growth rates and an increase in laid-up capacity: in 1967, the US manufacturing industry ran at 85 per cent of capacity on average as against 90.5 per cent in 1966 and 88.5 per cent in 1965. [244•1 p Fluctuations in military production may either precipitate an impending overproduction crisis or aggravate it when it 245 is already there. Discussing the characteristics of military production, we made a point of noting its greater susceptibility to variations in scale and structure compared with civilian industry owing to changing military policy and strategy, rapid advances in military technology and the resultant "rearmament cycles”, the outbreaks and ending of wars, etc. Curtailment of military production after the Korean war, to take but one example, might have added severity to the overproduction crisis of 1953–54. p Thus, military production governed, as it is, by its intrinsic laws fails to amend cyclic capitalist reproduction in peacetime. Yet military production, which is linked and interacts with civilian industry, has a varied impact on the capitalist cycle, staving off or quickening the onset of a crisis, mitigating or enhancing its insidious symptoms. p The impact of military expenditures on a nation’s economic potential. Karl Marx stated that war in its immediate economic effect is the same as for a nation to throw a part of its capital overboard. [245•1 Viewed from the economic aspect, military disbursements mean annihilation of material and manpower resources, as they create nothing of use to producer or private consumer. They are in fact a deduction from social product. Militarism diverts to destructive purposes what might have served mankind’s progress, destroys the fruits of the labour of millions. Military economic activities in general are a stumbling block in the way of economic progress. p In the contradictory conditions of capitalist reproduction, military outlays may, it is true, step up the rates of economic growth. An increment in a nation’s GNP attributable to military expenditures, however, is unhealthy economic growth. It is due, first, to an increased share of military goods in the gross national product, i.e., goods which cannot

be used for further production and which are not part of the level of living but are deadly weapons; second, this growth is transient, because no country, however rich, may afford to boost its military spending without end; third, if the resources consumed in military work had been used for peaceful purposes, they would have produced a much greater economic effect. 246 p The unending arms race and the use of technological achievements primarily for military purposes have an adverse effect on the US economy. The incessantly increased military spending may undermine its economic potential, the material basis for the giant US military machine. Therefore, extravagant military spending may in the long run prove ineffectual even from the aspect of building up military power whose material foundation may become undermined. p Military expenditures are unpardonable extravagance. The lavishing of enormous funds on unproductive military projects depletes the potentialities of the economy. This holds true even of situations where military spending increases current output. p For example, in the Second World War, the USA pushed up industrial output mainly by more intensive use of pre-war capacity geared to the war effort, reactivation of idle capacity and greater employment. In that period, new capital investments were insignificant, which deranged even the process of sinking fund restoration and resulted in the shrinking of fixed capital. [246•1 p In the post-war period, military expenditures, great as they were relatively and absolutely, did not halt the growth of US economic potential. But even then they tended, as they do now, to reduce the country’s possibilities for a further economic potential growth, acting as a brake of its rates. Bourgeois economists admit that these expenditures are among the main causes responsible for the economic, particularly financial and monetary, difficulties experienced by the United States. p The adverse effect produced by military work on the development of the US economy shows particularly strikingly in the following fields. p First, this work annually diverts large material, financial and manpower resources from productive uses. The most up-to-date instruments of labour and the best-qualified section of the labour force are employed in the armaments industry. In 1967, of the total labour force employed in the private sector of US military production, first-class specialists 247 accounted for 15.6 per cent, skilled operatives for 21.1 per cent and semi-qualified workers for 24.3 per cent, whereas the proportion of these groups in the country’s total employment was 13.3, 13.4 and 18.5 per cent respectively, i.e., it was far below that in the military sector of industry. In 1967, 61 per cent of all aeronautic engineers, 40 per cent of air mechanics, 38 per cent of physicists, 22 per cent of electronic technicians, 18 per cent of all production engineers, etc., were employed in the manufacture of military goods for the Department of Defence alone. [247•1

p The US Administration has made it a law that productive capacities and raw materials be used first and foremost to meet the military needs. In connection with expanding production to meet the demands of the Vietnam war, the Administration introduced quotas for certain strategic materials, for example, steel and copper. The consumption of materials of prime importance for military production is regulated by the Office of Industrial Mobilisation in the Bureau of Domestic Commerce. Whenever necessary, this Office institutes, on a Defence Department request, quarter-year quotas for the manufacture of individual types of strategic raw materials for the Pentagon, i.e., prescribes the proportion of productive capacity or actual output to mee.t the military demand. Such quotas are naturally laid down primarily for raw materials in very short supply, which has a negative impact on the civilian economy. p The arms race, the utilisation of material and manpower resources and technological progress above all for military purposes are increasingly handicapping the development of productive forces. This is admitted even by many leading bourgeois economists and politicians. Professor Boulding "of the USA maintains that ”. . .the US Department of Defense does a great deal of economic damage to the United States: it reduces domestic consumption by about fifteen per cent, and, by diverting the growth resource into the rat hole of competitive weapons systems, or even space technology, it diminishes the annual rate of economic growth, probably by as much as two per cent". [247•2 248 p Second, as noted above, over a half of all funds invested in research and development are used for military purposes in the United States. This obviously slows down technological progress in the civilian economy. Apologists of US imperialism often remark that scientific and technological innovations in the military field find their way into civilian industry. They cite examples of peaceful uses of new types of materials, technology and manufacturing processes which were developed and applied primarily for military purposes. However, there is a big gap between the theoretical possibility of using the results of military research and development in civilian production and their practical application. The development of modern sophisticated instruments of warfare involves the use of high-quality structural materials, technology and processes. The war industry uses, for instance, a wide range of metals, alloys, non-metallic and composition materials, many of which have not yet found a broad application in the civilian economy because they are costly or unavailable in quantity. In view of the widening gap between military requirements (advancement of modern weaponry which is extremely sophisticated and expensive as it is, space exploration, etc.) for which military research and development is carried out and the existing civilian demand, the possibility of direct use of military products for peaceful purposes is limited. p Even John Foster, Jr., DDR&E, had to admit that in 1969, for example, of the 981 million dollars spent on military aircraft research and development 843 million (86 per cent) went into programmes that were of no use to civilian industry. [248•1

p According to US publications, new fundamental scientific discoveries, as well as new technology and processes of a general character which come into being as a result of military research and development, rather than specific endproducts, are of increasing importance for the civilian economy. p Apologists of imperialism are usually silent about the fact that militarisation of science, employment of the greater and 249 most productive part of scientific personnel in military work, handicap technological progress in the civilian economy. The US aerospace industries alone employ more scientists and engineers than the machinebuilding, chemical, rubber and pharmaceutical industries combined. More than a half of all scientists and engineers involved in research and development in US industry work under contracts on Department of Defence and NASA orders. p The US Professor Boulding writes: "There is much evidence to suggest that civilian industry is deprived of able research scientists and engineers because of the ’internal brain drain’ into the war industry.... Because of the obsessive expansion of the war industry, many vital sectors of - the civilian economy are failing to solve their technical problems. We see this in transportation, in building, even in many areas of general manufacturing.” [249•1 The American scientist Richard S. Morse estimates that if capital investments in the US space programme had yielded as much as every dollar spent on research and development in civilian industry, the economy would have received additionally almost 100,000 million dollars a year. [249•2 p Third, great military expenditures are the main cause of a chronic deficit in the federal budget and, consequently, of all the economic and social ill-effects of this phenomenon: the growth of public debt, of inflation, of loan interest rate, etc. p Fourth, the enormous military expenditures overseas are a major cause of the chronic deficit in the US balance of payments, resulting in a steady depletion of the US gold reserves and a crisis of the monetary system of modern capitalism. In 1953, the USA had 21,800 million dollars in gold reserves, whereas towards the end of 1967 the figure had decreased to 11,500 million and by January 1969_ to 10,300 million. [249•3 The steep and steady decline in gold reserves has undermined the prestige of the US dollar as a world currency, posing a formidable problem for the USA. In the 250 past few years, its government has taken a series of measures to reduce the balance of payments deficit by restricting the export of American capital, slashing bank loans to foreigners and tourist expenses, curtailing federal expenditures overseas, etc. Since the early sixties, the US Defence Department has also taken austerity measures to cut military expenditures overseas and mitigate their negative impact on the balance of payments. As a result, the excess of currency spending for military purposes over revenues from the export of armaments and other military items has been reduced from 2,800 million dollars in 1960/61 to 1,700 million in 1962/63 and to 1,500 million in 1964/65. [250•1 However, the escalation of the Vietnam war led to a considerable increase in pure currency spending for military purposes. In 1967, this war alone demanded currency spending of at least 1,500 million dollars as against 200 million in 1965. The substantial growth of

military spending overseas contributed to the balance of payments deficit growing to 3,600 million dollars in 1967, a 150 per cent increase from 1966. [250•2 p The further increase in the balance of payments deficit is accompanied by growing monetary and financial difficulties in the USA, which reached a peak of acuity in 1971. The US Administration took "emergency measures" to save the dollar: it forbade the exchange of dollars for gold, imposed a 10-per cent import surcharge, a wage and price “freeze”. p These emergency measures exacerbated the contradictions between the imperialist powers and aggravated the crisis of the entire monetary system of modern capitalism to a point where the USA, under pressure from its trading partners, was compelled to devaluate the dollar and repeal the 10-per cent import surcharge. p The dollar devaluation implemented in 1971 and in 1973, however, failed to resolve monetary and financial contradictions between the USA and other capitalist states. The efforts of the USA to preserve, cost what it may, the special role of the US dollar in the .monetary system of capitalism are causing a further exacerbation of its crisis. 251 p The US ruling quarters are attempting to strengthen the country’s economic position not by curtailing its extravagant military expenditures, which are the root cause of its economic and financial difficulties, but by shifting the burden of growing military spending onto the shoulders of the working masses, as well as its partners in militarypolitical blocs. p US militarism has a negative impact not only on US economic development but also on the economies of its allies as well as on the economic development of states keenly sensitive to the market situation and fluctuations in US military production. This refers, above all, to the Latin American countries and Canada. As is known, the US monopolies hold the key positions in the economies of these countries. The huge direct capital investments of US monopolies in Canada and Latin America enable the USA to control in its selfish interests the course and trends of their economic development as suppliers of strategic raw materials for US imperialism An example in point is the development of the uranium– mining industry in Canada. In view of the great military-strategic importance of uranium and US growing demand for it, the USA stimulated the development of the Canadian uraniummining industry in the fifties (by setting high purchase prices of uranium, and granting tax, customs and other privileges to monopolies). Almost until the end of the fifties, the US Atomic Energy Commission, under an agreement signed as far back as 1948, had been importing all the uranium produced by Canada. This guaranteed demand stimulated a rapid growth of uranium extraction in Canada in those years. However, in view of the growing uranium production and the accumulation of large uranium reserves within the United States itself, the AEG in November 1959 notified the Canadian Government of its unwillingness on expiration of the contracts to take advantage of its priority right to purchase of Canadian uranium. The AEG refusal to

resume contracts for uranium imports led to a severe crisis in the Canadian uranium industry in 1960–66. p The blame for the steady increase in military spending throughout the world rests with the imperialist states, trie USA first and foremost. According to UN data, the arms race bearing heavily on mankind cost it roughly 120,000 million dollars in 1962. This sum accounted for 8-9 per cent of 252 the gross national product or a half of the annual capital investments in all the countries of the world. It was little short of the world’s total annual exports and equivalent to at least two-thirds and, by other estimates, to the whole of the aggregate national income of the developing countries. According to UN statistics, the total personnel of the armed forces and the labour force involved in military production ran into over 50 million by the same year. [252•1 Since then, however, the arms race has been greatly intensified. The world’s total annual military spending grew to 138,000 million dollars in 1965. The Vietnam war and the developments in the Middle East unquestionably led to a notable increase in military spending, which was expressed in astronomical figures as it was, reaching an estimated total of 180,000 million dollars in 1967. This world-wide military spending was comparable to the total annual income of the 1,000-million population of Latin America, South Asia and the Middle East. It is 40 per cent bigger than the world’s expenditures on education and more than three times the world’s annual spending for public health. [252•2 By 1971, world military expenditures had reached an estimated total of 216,000 million dollars. p The burden of military spending is rapidly growing in the economically less developed countries. Between 1958 and 1968, its share in the gross national product of the African countries grew from 1.8 to 5 per cent; in the Middle East countries, from 5.6 to 7 per cent. [252•3 p To size up military spending in individual countries, it is not enough to know its share in the gross national product or the national income. Account must also be taken of the general level of the productive forces, the total output and particularly the per capita national income. For example, in the USA, per capita military spending in 1963 was 10.8 per cent of the per capita national income, while in South Korea, the figure was 11.7 per cent. Compared on their face value, these data show no staggering difference in the burden of military outlays between these two countries. In the United States, however, the per capita total available for 253 civilian needs after deduction of military spending was 2,221 dollars in 1963, whereas in South Korea it was 39 dollars, i. e., l/56th of the former. [253•1 The difference speaks for itself. p For all the obvious negative impact militarism has on economic development, apologists of US imperialism extoll military spending as a stimulus for economic development and high employment, alleging that disarmament will lead to economic chaos and an unemployment rise comparable to that during the economic crisis of the thirties. In a report to the annual session of the American Economic Association, Harry Magdoff maintained, among other things, that if military employment were abolished, the unemployment rate in the USA might increase to 12 million, i.e., 14.3 per cent of the total labour force (1937 level). He went on to say that in view of the indirect influence

military spending has on the economy, the absence of a military budget would raise the unemployment rate to 24.3 per cent of the labour force, i.e., almost to the level of 24.9 per cent where the economic crisis of 1929–33 was at its worst. [253•2 Special studies carried out in the United States and other countries [253•3 indicate that the ending of the arms race, the implementation of a comprehensive disarmament programme, even if connected with certain difficulties involved in regearing the national economy, will cause neither economic depression nor unemployment, contrary to the assertions current in the Western military circles. Disarmament would relieve the world of the arms race burden. It would contribute to a considerable acceleration in the rates of world economic development. A reduction in military spending would provide favourable conditions for increasing economic aid from the industrially advanced countries to the developing countries. This would mean a long step along the path of economic and social progress and would make it possible to improve the welfare of all people of the earth in the historically brief space of time. *** TEXT SIZE

Notes [226•1] Economic Report of the President Transmitted to the Congress, January 1964, Washington, 1964, p. 39. [227•1] The Budget of the United States Government, Fiscal Year 1970, p. 533. [227•2] John Kenneth Galbraith, The New Industrial State, London, 1967, p. 229. [229•1] G. Harlow, The European Armaments Base: A Survey. Part 1: "Economic Aspects of Defense Procurement”, London, 1967, pp. 16–17. [230•1] 219.

Saving American Capitalism, ed. by Seymour E. Harris, New York, 1948, p.

[234•1] Economic Report of the President Transmitted to the Congress. January 1964, p. 209. [235•1] Ibid. [235•2] Economic Impact r>[ the Vietnam War, p. 45. [235•3] U. S. News and World Report, July 8, 1968, p. 73. [236•1] Monthly Labor Review, September 1967, pp. 9-10.

[236•2] The Handbook of Basic Economic Statistics, September 16, 1968, p. 79. [236•3] Economic Impact of the Vietnam War, p. 27. [237•1] Suri’cy of Current Business, September 1968, p. S-4. [238•1] Charles J. Hitch, Roland N. McKean, The Economics of Defense in the Nuclear Age, Cambr., 1960, pp. 69–70. [238•2] V. I. Lenin, Collected Works, Vol. 25, pp. 68–69. [243•1] Economic Impact of the Vietnam War, p. 12. [243•2] Business Week, October 28, 1967, p. 46. [244•1] World Economics and International Relations No. 9, 1968, Moscow, Supplement, pp. 80–81 (in Russian). [245•1] Marx and Engels Archives, Vol. IV, p. 29 (Russian translation). [246•1] Planning and Forecasting in the Defense Industries, ed. by J. A. Stockfish, p. 57. [247•1] Monthly Labor Review, September 1967, pp. 17–18. [247•2] American Militarism 1970, ed. by Erwin Knoll and Judith Nies McFadden, New York, 1969, p. 91, [248•1] Marvin Berkowitz, ’The Conversion of Military-Oriented Research and Development to Civilian Uses, New York, 1970, p. 110. [249•1] American Militarism 1970, ed. by Erwin Knoll and Judith Nies McFadden, p. 94. [249•2] U. S. News and World Report, June 7, 1971, p. 24. [249•3] Federal Reserve Bulletin, May 1967, p. 888; Survey of Current Business, February 1969, p. S-19. [250•1] Economic Impact of the Vietnam War, p. 50. [250•2] World Economics mid International Relations No, 9, 1968, Supplement, p. 75 (in Russian). [252•1] Congressional Record, January 29, 1963, p. 1247.

[252•2] World Military Expenditures 1966–1967, Washington, 1968, pp. 8-9. [252•3] Wehr und Wirtschaft No. 10, 1968, S. 495. [253•1] Calculated from: The Military Balance 1964/65, London, 1964, p. 41. [253•2] The American Economic Review, May 1970, p. 241. [253•3] In the book Disarmament and the Economy (New York, 1963), the well-known US economists E. Benoit and K. Boulding discuss, for example, the possibilities for regearing the US economy to exclusive civilian production.

2. THE IMPACT OF MILITARISM ON THE LIVING CONDITIONS OF THE WORKING PEOPLE

p Throughout the history of capitalism wars have been a terrible scourge of humanity. War preparations and hostilities spell privations, suffering, death and other incalculable disasters for the peoples. The working masses are the first victims of wars and the arms race. It is precisely with their toil and with their hands that the imperialists prepare and wage wars in their class interests. p As weapons of war become more and more sophisticated, wars take an increasingly huge toll of lives. The total of officers and men killed in all the wars of the seventeenth century is estimated at 3,300,000; in the eighteenth century, at 5,372,000; during Napoleonic wars (1801–15), at 3,457,000; between 1815 and World War I, at 2,217,000. [254•1 World War I took a toll of 10 million lives, World War II, almost 50 million. p Thousands of Vietnamese freedom fighters lost their lives in the inhuman US war against the heroic people of Vietnam. Plain American lads also died in this war waged in pursuance of the adventurist reactionary plans of US imperialism. According to US statistics, obviously understated, the US armed forces in Indochina lost approximately 46,000 officers and men prior to 1972. p Militarism and the growing arms race bring colossal profits to the monopolies and new privations and sufferings to the working masses. "While enriching some groups of the monopoly bourgeoisie,” the CPSU Programme reads, " militarism leads to the exhaustion of nations, to the ruin of the peoples languishing under an excessive tax burden, mounting inflation and a high cost of living.” [254•2 p As noted above, at present approximately a half of the US federal budget expenditures is intended for military needs. An analysis of the total budget revenues shows the sources

and methods of financing military expenditures. The funds required to meet both military and civilian expenditures are accumulated by the government through taxation, loans, 255 emission of paper money and other means. The main source of income for the capitalist state, the economic foundation of its existence and operation is taxes, the burden of which is shouldered mostly by working people. Karl Marx wrote: "The taxes embody the existence of the state expressed economically. Government officials and priests, soldiers and ballet dancers, schoolteachers and policemen, Greek museums and Gothic towers, the civil register and the table of ranks—all these fairy-tale creatures are contained in embryo in one common seed—the taxes.” [255•1 p The importance of each of these methods for collecting money needed by the government vary from country to country. In one and the same country their role may vary for different periods of its history. But military preparations and wars are invariably conducted in such a way as to make the toiling masses bear the brunt of the burden of military spending. p The US military expenditures in the Second World War were much larger than in the First. It is reported in US publications that US military financing in World War II was more efficiently organised than it had been in World War I. From June 1, 1940 to December 31, 1945, about 43 per cent of the federal military and civilian expenditures was met with taxation and other government revenue, whereas in the First World War, these sources only covered a little over one-fourth of all expenditures. An increase in tax revenue was secured by raising existing tax rates, repeated reductions of the tax-exempt income minimum (from 1,000 dollars, for single taxpayers and from 2,500 dollars for those with* a family in 1939 to 500 and 1,200 dollars respectively in 1944) and by introducing new taxes, in particular, indirect taxation of prime necessities. Income tax rates were increased the most for low earned income (from 4.4 per cent in 1939 to 23 per cent in 1944). [255•2 As a result of repeated reductions of the tax-exempt minimum, millions of low-income American families formerly exempt from income tax became taxpayers. All this made for a notable increase in the tax burden on the working people, whereas the capitalists used 256 various loopholes to conceal their true income and largely evaded paying taxes. [256•1 p The bulk of US military procurement in World War 11 as in World War I was financed out of state loans. [256•2 This meant a rapid increase in the public debt (see Table 43) and the prospect for the working people to bear the brunt of this military spending for long years after the war, since loans are repaid at interest with tax money exacted from the people. In 1917, Lenin, in his article "A Turn in World Politics”, wrote that "the mountain of war debts shows the extent Table 43 US National Debt (end of fiscal year) Fiscal year Mil. dollars Fiscal year M»air- Fiscal year Mil. dollars 1789–1849 63 1937 41 ,089 1956 272,825 1850–99 1,437 1938 42,018 1957 270,634 1900 1,263 1939 45,890 1958 279,147 1905 1,132 1940 48,497 1959 286,666 1910 1,147 1941 55,332 1960 289,243 1915 1,191 1942 76,991 1961 290,991 1916 1,225 1943 140,796 1962 301 ,047 1917 2,976 1944 202,626 1963 308,488 1918 12,455 1945 259,115 1964 314,377 1919 25,485 1946 269,898 1965 320,806 1920 24,299 1947 258,376 1966 329,473 1925 20,516 1948 252,366 1967 341,343 1930 16,185 1949 252,798 1968 369,800 1931

16,801 1950 257,377 1969 367,100 1932 19,487 1951 255,251 1970 382,600 1933 22,539 1952 259,151 1971 409,500 1934 27,734 1953 266,123 1972 437,300 1935 32,724 1954 271,341 1973 (es 1936 38,497 1955 274,418 timate) 473,300 Sources: The Budget oj the United States Government, Fiscal Year 1966, p. 490; Fiscal Year 1972, p. 575; Fiscal Year 1974, p. 370. 257 of the tribute the proletariat and the propertyless masses ‘must’ now pay for decades to the international bourgeoisie for having graciously permitted them to kill off millions of their fellow wage-slaves in a war for the division of imperialist booty". [257•1 The past wars were financed in the USA mostly with government loans and the emission of banknotes, i.e., by methods securing mobilisation of funds within relatively brief periods, while shifting the main burden of military spending onto the shoulders of the working masses. After the Second World War, the immense US military activity has been financed above all from tax revenue. Of all the ordinary federal budget revenue, taxes account for 99 per cent, other receipts, for approximately one per cent. [257•2 The latter include payments for various government services, fines, rent, donations, etc. In official US statistics revenue other than taxes comes under the "other receipts" item. In view of the negligible share of other receipts, it may be assumed that the US federal budget’s ordinary revenues consist wholly of taxes, whose structure is illustrated in Table 44. Table 44 Administrative Budget and Trust Receipts (thous. mil. dollars) Fiscal years Type of revenue 1962 1965 1967 1969 1970 1972 1<»73* 1974* Individual income taxes ..... 45 6 48.8 61 5 87.2 90 4 94 7 99 4 Hi. 6 Corporation income taxes ..... 20.5 25.4 34.0 36.7 328 32 2 33 5 37.0 Social insurance taxes and contributions (trust funds) . . . Excise taxes** . . . Estate and gift taxes Customs duties . . Miscellaneous receipts" ..... 17.1 12.5 2.0 1.1 0.9 22.3 14.6 2.7 1.4 1.6 33.3 13.7 3.0 1.9 2.1 40.0 15.2 3.5 2.3 2.9 45.3 15.7 3.6 2.4 3.5 53.9 155 5.4 3.3 3.6 64.5 16.0 4.6 3.0 4.0 78.2 16.8 5.0 3.3 4.1 Total ...... 99.7 116.8 149.5 187.8 193.7 208.6 225.0 256.0 p * Estimate. p ** Includes both federal funds and trust funds. p Sources: The Budget of the United States Government, Fiscal Year 1972, pp. 567–68; Fiscal Year 1974, p. 61. 258 p The table shows that direct taxes, i.e., those levied directly on taxpayers’ income, account for the bulk of federal budget revenue. Their basic types are individual income tax, corporation income tax, estate and gift taxes. p Roughly two-thirds of direct taxes are individual income taxes. They had a relatively minor role to play before the Second World War, accounting in 1939 for only 19 per cent

of the total federal budget revenue. [258•1 However, as a result of repeated rate increases (for example, during the Second World War and the Korean war), reductions of tax-exempt minimums and raises in nominal wages and salaries (with a consequent wider income tax assessment and a higher rate on the rates scale), the revenue from individual income tax has steeply grown in the past 25 years to form the bulk of the budget receipts today. To meet the huge costs of the Vietnam war, the US Administration raised income tax 10 per cent in 1968. Individual income tax is levied both on wages and salaries of workers and office employees and on capitalist private income. Its overwhelming proportion, however, is formed of deductions from wages and salaries. For example, in 1966/67, they accounted for over 70 per cent of the total individual income tax revenue [258•2 . In the USA, individual income tax is levied under a sliding scale of progressive assessment rates. This tax is based on graduated progression, i.e., taxable income is graduated into portions assessed at definite rates increased in proportion to income growth. The total tax is determined by the summation of charges on individual portions of income. With this tax assessment the total taxes paid by individuals with a huge income are far below the maximum tax rate in percentage to total taxable income. p Another type of the US federal income tax is corporation income tax, which accounts for about 15 per cent of the total budget revenue. This tax is levied on the profits of corporations. As a result of the tax reform of 1964, on the first 25,000 dollars of profit the corporate rate went down from 30 to 22 per cent. On all above 25,000 dollars the rate 259 dropped from 52 to 48 per cent. [259•1 By understating their true income, corporations evade paying taxes. Moreover, they are granted a number of tax concessions by legislation, for example, the privilege of accelerated rate of depreciation tax concessions for research and development, rebates for depletion of mineral resources, the right of payment out of corporate income of huge personal salaries and bonuses to corporation presidents and directors, concessions for the maintenance of country estates, monetary awards to lobbyists and many other payments out of corporation profits, reducing essentially the size of taxable income and, consequently, the amount of budget revenue. p Estate tax is levied on property acquired by inheritance or bequest, and gift tax, on gifted property or cash. p Indirect taxes make part of almost all consumer prices as a special surcharge paid to the federal budget. By raising goods prices, particularly consumer prices, indirect taxes keep down real earnings of factory and office workers. Lenin wrote that "indirect taxation affecting articles of mass consumption is distinguished by its extreme injustice. The entire burden is placed on the shoulders of the poor, while it creates a privilege for the rich. The poorer a man is, the greater the share of his income that goes to the state in the form of indirect taxes.” [259•2 p Before the First World War, the bulk of the federal budget revenues came from indirect taxes, while in the period between the two world wars their share was roughly under a half of the budget revenue. After the Second World War, the rapid growth of direct tax revenue resulted in a sharp reduction of the share of indirect taxes in the total budget receipts, though its absolute size increased. Indirect taxes are many. Among those paid to

the federal budget excise taxes and customs are the main ones. In the post-war period, customs duties have accounted for a little over one per cent of federal revenues, whereas in the nineteenth century, they gave the bulk of the federal budget receipts. [259•3 The 260 fact is that the United States instituted prohibitive tariffs to protect its home market against foreign monopoly competition, while the budget income on the whole was small. p Summing up taxes paid by the US working people to the federal budget and the budgets of states and municipal governments, one will find that today they consume roughly onethird of earned income as against one-sixth on the eve of the Second World War. p Growing government spending, mostly military, means an increasing tax burden on the working people. In the Town Hall of Stockholm is the effigy of an unfortunate little human being, crouched on all fours—his back supporting the larger statue of an ancient ruler of the city. Nobody knows who the heavily burdened man is, but Stockholmers like to quip: "It’s the Swedish taxpayer.” The US Business Week journal wrote in its August 25, 1962 issue that this cowed figure could well stand as a cenotaph to the Unknown Taxpayer in most Western lands today. p The increase in tax revenue lags behind the growth of government, mostly military, spending. Taxation has definite political and economic limits beyond which its increase is socially dangerous for the bourgeoisie. The point is that the efforts of bourgeois governments to raise taxes on the working people to a maximum thereby reducing their real earnings are opposed by the organised class struggle of the working class for its vital interests. It is self-evident that in this situation taxes cannot be increased indefinitely; therefore a chronic budget deficit is compensated for by an increase in government debt. p As was pointed out above, government loans were the principal method of financing US wars in the past. Formerly, however, the government debt was relatively small; what is more, the debt increased in wartime and notably decreased, as a rule, in time of peace. Until the thirties of the present century measures to avoid a large government debt were among the guidelines of the US official budget policy. The world economic crisis, the Second World War and the aggressive post-war policy of US imperialism led to a revision of the traditional US government attitude to federal debt. The unrestrained arms race and the use of the budget as a tool for implementing various state-monopoly measures to 261 mitigate the contradictions of capitalist reproduction and stimulate the nation’s economic development are responsible for the well nigh chronic federal budget deficit. Clear enough, in this situation a reduction of government debt is out of the question because this would require an excess of budget receipts over expenditures. And conversely, the offsetting of big annual budget deficits in the post-war period has involved a steady increase in government debt. It has been mounting rapidly in the past few years, as the Vietnam war has caused a record growth in the budget deficit. p Speaking of the essence of loans issued by bourgeois states, Karl Marx wrote: "The ‘State’, that jointocracy of coalesced land and money mongers, wants money for the purpose of home and foreign oppression. It borrows money of capitalists and usurers, and in return gives them a bit of paper, pledging itself to pay them so much money in the

shape of interest for each £100 they lend. The means of paying this money it tears from the working classes through the means of taxation—so that the people are the security for their oppressors to the men who lend them the money to cut the people’s throats.” [261•1 p Government debt increased by huge military expenditures is a heavy burden not only on the living but also on the future generations. Government debt means taxation by instalments because in the final analysis it is re-paid at interest from tax revenue. Therefore, future generations will have to defray a share of current military expenditures of the US imperialists just as the living generation has to compensate for military spending in the past. p The mechanism of military financing enhances still more exploitation of the working people and serves to re-distribute the national income in favour of US ruling circles. This is effected, above all, by increasing the tax burden as described above. Not only do the methods of financing military spending make for an increased tax burden but they also generate some other phenomena contributing to a higher cost of living. p This refers first and foremost to the inflationary price rise which is largely due to the budget deficit being offset by increasing government debt. For example, the rapid increase 262 in the government debt due to the Vietnam war was one of the rootcauses of sky-rocketing prices in the United States. The index of consumer prices (taking 1967 as 100) grew from 88.7 in 1960 to 94.5 in 1965, and to 116.3 in 1970. In this way, prices grew almost 23 per cent over five years, whereas the increase over the preceding five years (1960–65) was only 5.6 per cent. [262•1 By May 1973 this price index had grown to 131.5. p In the past few years, prices have been climbing to leave nominal wages and salaries way behind. For example, the average nominal weekly wage of workers in the US manufacturing industry has risen by August 1970 9.4 per cent since 1968 as against the 12.2 per cent rise in consumer prices. This price rise proceeding faster than the increase in nominal earning depletes the working people’s real incomes more and more. Add to this the growing taxes to see the disastrous fall in the working people’s real earnings. p After the Second World War, the US working people’s stubborn class struggles secured a certain increase in real wages. This notwithstanding, the average real earnings of US industrial workers were below a decent subsistence minimum. For example, in 1965, this minimum for a family of four was 123 dollars a week, according to Department of Labour estimates, whereas the worker’s average weekly earnings were only 105 dollars, i.e., 15 per cent below the typical family budget. The plummeting real earnings of recent years have doubtless widened the gulf between the official subsistence minimum and the working people’s incomes. The growing military spending resulting in tax increases and a rising cost of living affects worst the population strata within low-income brackets. In his time, President Johnson noted in his economic message that 10 million American families (30–40 million people) lived in poverty.

p The disastrous effect of military-economic activities is to be seen also in the field of government social programmes. For example, the federal government, while escalating military spending in Vietnam, slashed outlays under the programmes of President Johnson’s widely advertised "Great Society”. The reduction of appropriations for social needs is 263 illustrated by President Nixon’s message to Congress on the administrative budget for fiscal 1974. Thus even modest civilian programmes, whereby relatively small funds were to be spent for the social needs of American society and for poverty control, have been sacrificed to the US military strategy. p The USA spent on the war in Indochina more than the total appropriations for education, public health, hospital and housing construction, poverty control, maintenance of the administrative system, and other civilian purposes. This contrast was so striking as to be admitted even by top-notch US statesmen and politicians. J. William Fulbright, Chairman of the Senate Foreign Relations Committee, in his book The Arrogance of Power, wrote that "for the present at least the inspiration and commitment of the Great Society have disappeared. They have disappeared in the face of our deepening involvement in Vietnam, and although it may be contended that the United States has the material resources to rebuild its society at home while waging war abroad, it is already being demonstrated that we do not have the mental and spiritual resources for such a double effort". [263•1 The huge US military spending diverts the nation’s resources from civilian needs. When planning budgetary appropriations the Administration and Congress give priority, as a rule, to military expenditures. As a result, acute social and economic needs of society remain neglected. p Militarisation stepped up by the imperialists is a crime against humanity. Suffice it to mention that the US direct and indirect military expenditures are roughly equivalent to the gross national product of Italy. The examples below illustrate the extravagance of militarism. One modern war plane costs as much as 13 schools or 570 houses. The worth of iust one modern heavy bomber could double the education budget of the whole State of New York. [263•2 The 22,000 million dollars the USA spent in Vietnam in one year could build 296,000 elementary and secondary classrooms needed to eliminate overcrowding and replace defective structures; 264 and construct and equip the 656,500 long-term care and hospital beds needed to adequately service patients. [264•1 p Imperialism is spending colossal funds for the needs of war whereas about two-thirds of mankind is still suffering from famine, malnutrition and epidemics, when despite scientific and technological progress, many countries still remain weakly developed. Millions upon millions of people live in slums and experience privations even in highly developed capitalist countries, let alone economically backward ones. p Increasing militarisation means not only a growing tax burden and a rising cost of living, the diversion of a nation’s resources from civilian needs, but also restriction of democratic freedoms, an increasingly unstable situation of factory and officer workers, deterioration of their working conditions and greater labour intensity.

p Militarism and the arms race entail other socio-economic and political dislocations. The US sociologist D. Horowitz writes that the nation’s growing military-industrial potential not only inhibits its economic development but also strengthens the Right-wing political forces and provides the groundwork for unhindered accumulation of "critical social problems". [264•2 p The “ultras”, the neo-fascists are intimately associated with the reactionary military and with monopoly capital working for war. The militarist “elites”, often cultivated with American “aid” money, are a direct tool of forces opposing progressive democratic organisations, above all the working-class movement. In all capitalist countries where militarism develops to a considerable extent it turns into an extreme reactionary force launching an offensive against the fundamental democratic rights and freedoms. The intensified militarisation and arms race in the USA stimulated by the aggressive policy of US imperialism and bringing huge profits to the arms-manufacturing monopolies are a heavy burden on the working masses impairing their social and economic conditions. ***

Notes [254•1] B. C. Urlanis, Wars and the Population of Europe, Moscow, I960, pp. 334, 472 (in Russian). [254•2] ’fhe Road to Communism, Moscow, p. 474. [255•1] Marx/Engels, Werkc, Bd. 4, S. 348. [255•2] Dan Throop Smith, Federal Tax Reform, New York-Toronto– London, 1961, p. 312. [256•1] These questions are discussed in detail in N. N. Lyubimov’s Finance of Capitalist States (Moscow, 1956, in Russian) and in E. Y. Bregel’s Taxes, Loans and Inflation at the Service of Imperialism (Moscow, 1953, in Russian). [256•2] For detailed analysis of national debt read: Government Credit in the USA in the Imperialist Era by R. M. Entov (Moscow, 1967, in Rus[257•1] V. I. Lenin, Collected Works, Vol. 23, p. 263. [257•2] U. S. Income and Output, Washington, 1958, p. 164. [258•1] Historical Statistics of United States Colonial Times to 1957, Washington, 1960, p. 713.

[258•2] Treasury Bulletin, March 1968, p. 4. [259•1] U. S. News and World Report, February 3, 1964, p. 40. [259•2] V. I. Lenin, Collected Works, Vol. 5, p. 336. [259•3] John M. Firestone, Federal Receipts and Expenditures During Business Cycles, 1879–1958, Princeton, 1960, p. 15. [261•1] K. Marx, "The New Financial Juggle; or Gladstone and the Pennies" in the People’s Paper No. 50, London, April 16, 1853. [262•1] Calculated from: The Handbook of Basic Economic Statistics, August 1971, pp. 224–25. [263•1] J. William Fulbright, The Arrogance of Power, New York, 1966, p. 133. [263•2] Newsweek, July 11, 1966, p. 11. [264•1] Economic Notes, January 1967, p. 8. [264•2] International Sodialist Journal No. 24, Rome, December 1967, pp. 826–27.

AFTERWORD

p Never before in the history of mankind have militarism and the arms race in peacetime reached such a huge scope as after the Second World War. Militarism has grown to the most dangerous proportions in the United States, which accounts for about 75 per cent of the NATO military spending. The United States holds the leading place among the capitalist states not only for the overall scale of its militaryeconomic preparations but also for the extent of militarisation of its economy, science and state budget. p The unprecedented rise of militarism in the United States and in other capitalist countries was accompanied by the increase in the size and burden of military spending. According to available data the total annual sum of direct military spending in the world grew from 120 thousand million dollars in 1962 to 216 thousand million dollars in 1971. Even these astronomical figures are obviously understated, because they illustrate all the officially declared direct military spending and do not include its other numerous types concealed in the civilian items of state budgets. p According to data of the Stockholm International Peace Research Institute, the military spending in the modern world has grown tenfold since 1913 (in comparable prices). In 1913, not more than 3-3.5 per cent of the world’s gross product was earmarked for military purposes. In the early 30s this index remained at approximately the same level. In the past few years it grew to roughly 6-7 per cent, i.e., twice as much as in 1913. In 1937, per capita military spending in 266 all the leading imperialist countries taken together was 25 dollars (in nazi Germany, 58.8 dollars). [266•1 Whereas in 1971 it was 378 dollars in the United States, 109 dollars in Great Britain, 101 dollars in France, 100 dollars in the FRG, and 77 dollars in Canada. [266•2 Even with the inflationary price

rise taken into account the per capita military spending today is several times its pre-war level. p The prolonged arms race has led to the establishment of a large and permanently functioning military sector in the economy. In the imperialist countries, millions of peoples, almost all sectors of the economy, large industrial complexes and the numerous military industrial enterprises are involved in the production of military equipment. Regular diversion of huge material and manpower resources to military purposes has a disastrous impact on economic development and the living standards of the working people, hinders the solution of vital social problems, problems of the environment, etc. p Militarism and wars have always posed a great danger to mankind. Already World War I, as Lenin emphasised, led to undermining "the very foundations of human society". [266•3 This danger increased manyfold during World War II which cost mankind even greater casualties and suffering. But the threat of militarism and war has become particularly immense with the advent of thermonuclear weapons. The stockpiles of these overkill weapons are so great that their use would cause irreparable damage to world civilisation as experts unanimously agree. The aftereffects of a thermonuclear war would tell on the lives of many future generations, "annihilate hudreds of millions of people and turn entire countries into deserts" [266•4 in this conflagration. p In this situation, the struggle to avert devastating thermonuclear war becomes today the central objective because it means the struggle for mankind’s future. p The preservation of peace and the strengthening of 267 international security have invariably been in the focus of Soviet foreign policy. While continuing and finalising for the current stage this general line of Soviet foreign policy, the 24th CPSU Congress advanced a new, scientifically grounded Peace Programme. The active and purposive foreign policy line of the Soviet Union in implementing this programme favourably contributes to the easing of world tensions, to strengthening international security, to establishing the principles of peaceful coexistence of states with different social systems. The visits of General Secretary Brezhnev to the USA, the FRG and France have been particularly important in this respect. p A sober assessment of the existing balance of forces on the international scene and the catastrophic consequences of a world conflict with the use of nuclear missiles impels increasingly wider circles of leaders and ideologists of the West to recognise the untenability and danger of staking on a world war as a means of solving international disputes. This major circumstance and the objective conditions of the economic, scientific and technological development of the two world systems lead a growing number of statesmen to the conclusion that in the present situation peaceful coexistence is the only reasonable principle of relations among states with different social systems, one that is dictated by life itself. p As a result, the principle of peaceful coexistence, the inevitability, expediency and possibility of which was advanced and proved by Lenin, has been winning broad

recognition and practically implemented in the past few years. This has been expressed, in particular, in the signing of a number of agreements and treaties between the socialist and the leading capitalist countries. These refer to the wellknown treaties between the Soviet Union and the United States, the Soviet Union and the Federal Republic of Germany, Poland and the FRG, a complex of agreements on West Berlin, the Treaty on the principles of relations between the GDR and the FRG, the normalisation of relations between the FRG and Czechoslovakia, etc. These treaties provide for observance of the principle of peaceful coexistence in international affairs. The document on the "Basic Principles of Mutual Relations between the Union of the Soviet Socialist Republics and the United States of America" 268 signed in Moscow in May 1972 acknowledges the consent of both sides "to proceed from the common determination that in the nuclear age there is no alternative to conducting their mutual relations on the basis of peaceful coexistence”. p The assertion of the principle of peaceful coexistence and the easing of international tension reduce the danger of the world conflagration and have a restraining influence on the arms race. The political detente now in evidence is not yet accompanied by military detente. What is more, the race in building up military stockpiles continues in the world, mostly by way of qualitative improvement in armaments, i.e., the development, production and commissioning of increasingly powerful and destructive weapons systems. The military– industrial complexes, the militarist, revanchist and other reactionary forces of imperialism go out of their way to spur up the arms race. Under a variety of pretexts and manipulating numerous levers, in particular the mass media, these forces invariably oppose an improvement in the world climate, seek to increase the military budgets and to build up the military potential of the NATO countries, advance "Atlantic Unity" programmes to achieve closer association of the leading capitalist powers. p In this way the reactionary imperialist circles seek not only to preserve but also to strengthen substantially the material basis for unleashing and waging wars. This flagrantly contradicts the positive trends in international relations today. The vital interests of all peoples demand that the current political detente be reinforced with military detente. The most realistic way to attaining this difficult objective and delivering mankind from the threat of militarism and a world-wide thermonuclear war is the ending of the arms race, the reaching of agreement on troops and arms reduction and gradual advance towards general and complete disarmament. p As far back as the 20s, the Soviet Union advanced as an urgent international task that of implementing general and complete disarmament as a means of securing peace and friendship among nations. Loyal to Lenin’s behests, the Soviet Government has repeatedly come forward with a concrete programme of disarmament which is bound to liberate the living and future generations from the burden of the 269 arms race. The 24th Session of the UN General Assembly in 1959 unanimously approved the Declaration of the Soviet Government on the General and Complete Disarmament of All States.

p The Soviet Union has also displayed an important initiative which led to the signing of the Moscow Treaty banning nuclear weapon tests in the atmosphere, in outer space and under water in 1963. Soviet foreign policy has largely contributed to the conclusion of the treaties on the non– proliferation of nuclear weapons, on the prohibition of the emplacement of nuclear weapons and other weapons of mass destruction on the sea-bed and the ocean floor and in the subsoil, as well as the Convention on the prohibition of the development, production and stockpiling of bacteriological ( biological) and toxin weapons and on their destruction. p The problem of ending the arms race and of disarmament is pivotal in the Soviet Peace Programme. While implementing it, the Soviet Union secured the conclusion of the wellknown Soviet-American agreements and treaties on strategic arms limitation. p In accordance with its Peace Programme the Soviet Government submitted to the 27th Session of the UN General Assembly its proposals on the renunciation of force in international relations and the prohibition of the use of nuclear weapons and on the convocation of a world disarmament conference. The General Assembly voted overwhelmingly in favour of solving the two outstanding problems mentioned above. p The Soviet Union has come forward with a new important initiative: its proposal calling on the permanent members of the Security Council to cut their military budgets by 10 per cent and to use part of the money thus released to assist the developing countries has been approved and included in the agenda. p The importance of these partial achievements cannot be underestimated. First, they put up definite obstacles in the way of the arms race; second, they evidence that acute international disputes can be settled through negotiations and third, they create favourable prerequisites for new talks on ending the arms race and for stepping up the effort to eliminate the danger of a world-wide thermonuclear war. 270 p In the present situation, the success in the practical solution of this central problem of today largely depends on the character and course of competition between the two systems on the world scene, above all on relations between the Soviet Union and the United States. p The Soviet Union and other socialist countries are jointly working for setting up an effective system of collective security, for closing down military bases and disbanding military groupings in foreign territories and for implementing other measures directed to strengthening peace, ending the arms race, securing troops and arms reduction. The socialist community is making every effort so that the inevitable class struggle between the two opposite social systems would not lead to a military conflict between them. p “The CPSU has always held, and now holds,” L.I. Brezhnev said, "that the class struggle between the two systems— the capitalist and the socialist—in the economic and

political, and also, of course, the ideological domains, will continue. That is as it should be, because the world outlook and the class aims of socialism and capitalism are opposite and irreconcilable. But we shall strive to shift this historically inevitable struggle onto a path free from the perils of war, of dangerous conflicts and uncontrolled arms race. This will be a tremendous gain for world peace, for the interests of all peoples, of all states.” [270•1 p An important stage in the people’s struggle for preserving and strengthening peace was the World Congress of Peace Forces held in Moscow from October 25 to 31, 1973. In his speech at the Congress General Secretary Brezhnev gave a profound and comprehensive analysis of the current international situation and set out in detail the basic principles of Soviet foreign policy, described the multifarious activities of the CPSU and the Soviet Government directed to preserving and strengthening peace, and emphasised the great role of the peace movement in the struggle for international security. The Moscow Congress which was attended by over 3,000 people of good will from 143 countries is bound to play an important role in stepping up and pooling the efforts of all 271 peace forces. The Communists of the world have arrived at a scientifically grounded conclusion "based on a comprehensive analysis of the present epoch and the world balance of forces that today a new world war is not fatally inevitable and that it can be averted. However, long and persistent struggle is required to curb militarism, put an end to the arms race and eliminate the danger of war. The achievements made in the last few years facilitate this struggle and the pooling of efforts by all revolutionary, progressive and peace forces of the world with a view to fully eliminating the threat of a world-wide thermonuclear war and securing universal peace on earth. *** Notes [266•1] The American Economic Review, May 1970. [266•2] The Military Balance 1972–1973, p. 70. [266•3] V. I. Lenin, Collected Works, Vol. 27, p. 422. [266•4] International Meeting of Communist and Workers’ Parties, Moscow 1969, Prague, 1969, p. 21. [270•1] L. I. Brezhnev, The 50th Anniversary of the USSR, Moscow, 1972, p. 60.