From Portside <[email protected]>
Subject The Corona Virus and the Limits of the Market: Convert Defense and Other Industries to Fight New Security Threats
Date March 29, 2020 12:00 AM
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[We need to begin to investigate how to convert both the military
and health industrial complexes to the urgent needs required by the
Coronavirus crisis. ] [[link removed]]

THE CORONA VIRUS AND THE LIMITS OF THE MARKET: CONVERT DEFENSE AND
OTHER INDUSTRIES TO FIGHT NEW SECURITY THREATS  
[[link removed]]


 

Jonathan Michael Feldman
March 25, 2020
Global Teach-In
[[link removed]]


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_ We need to begin to investigate how to convert both the military
and health industrial complexes to the urgent needs required by the
Coronavirus crisis. _

,

 

A CRISIS OF SUPPLY AND DEMAND

The Corona Virus crisis is a crisis of both economic supply and
economic demand
[[link removed]].
The supply crisis is triggered by factories closing to protect factory
workers and other businesses doing the same (to protect workers or
consumers). The demand side of the crisis is triggered by the fact
that workers laid off often don’t have as great incomes, because
many service businesses are closed or see less business for obvious
reasons. The market, which often works as a useful coordinating
mechanism, has proven to be limited in solving the supply and demand
problems generated by this crisis.

Cutting interest rates won’t provide a meaningful alternative to
these supply and demand problems. Instead, we must ask basic
questions
[[link removed]] about
how resources are organized in society. The basic questions center on
the role which security policies and globalization have played in
diverting nations from priorities in health, welfare and equitable
economic development. _The health crisis is partially a production
crisis_.

On the one hand, governments have invested in obsolete “hard
power” military missions that increasingly waste resources needed to
combat environmental and health crises. On the other hand, a team of
writers
[[link removed]] at _The
New York Times_ have explained how globalization and outsourcing
sustain the production crisis: “a shortage of masks has become a
bottleneck slowing the rollout of testing, which experts say is
crucial to containing the virus.” Various “companies are
struggling to quickly expand their mask-making capacities, in part
because of broken overseas supply chains and some countries’
restrictions on exporting protective gear during the crisis.”

THE THREAT OF THE NEXT GREAT DEPRESSION

A March 20, 2020 article by Laurence Darmiento in _The Los Angeles
Times_ discussed the potential of a Great Depression: “experts are
grappling with a situation as novel as the virus that caused it, and
they really don’t know how much our high-tech, interconnected and
consumption-oriented economy can endure.” He quotes Roger Framer of
UCLA and Warwick as follows: “The longer this disruption goes on,
the more likely it will have a permanent effect…Three weeks we can
bounce back from, three months is not so clear.” A report on March
17th on the USA noted about 18% of adults reported that “they had
hours cut or had been laid off, with the workers in lower-income
households hit hardest.” Moody’s Analytics claimed that “nearly
80 million U.S. jobs” have different risk levels with Darmiento
suggesting  “it’s more likely some 10 million workers could
either be laid off, furloughed or see their hours and wages cut.”
While teleworking can help some, Darmiento noted: “Cashiers,
waiters, construction workers and others in the blue-collar workforce
don’t have that luxury as they sit at home without pay.”

Dion Rabouin in Axios went further in an article entitled,
“Coronavirus could force the world into an unprecedented
depression.” Rabouin began his essay as follows: “In its latest
repricing of the economy, the market sees the now-expected global
recession caused by the coronavirus
[[link removed]] outbreak morphing into an
economic depression unlike any the world has seen in generations.”
He identified “the big picture” by stating that “bankers and
traders are looking to sell everything that isn’t nailed down to
boost cash positions and hunker down for the worst.” Rabouin pointed
to Deutsche Bank economists who predicted a “severe global recession
occurring in the first half of 2020” and “quarterly declines in
GDP growth we anticipate substantially exceed anything previously
recorded going back to at least World War II.”

CNN on March 21st published a story, “Coronavirus spreads, raising
threat of global economic depression
[[link removed]].”
An earlier CNN story
[[link removed]] on
March 19th quoted former Trump economist Kevin Hassett as follows:
“We’re going to have to either have a Great Depression, or figure
out a way to send people back to work even though that’s
risky…Because at some point, we can’t not have an economy,
right?”

Finally, Nouriel Roubini, the business and economics scholar, wrote
on March 24, 2020
[[link removed]]:
“_With the COVID-19 pandemic still spiraling out of control, the
best economic outcome that anyone can hope for is a recession deeper
than that following the 2008 financial crisis. But given the flailing
policy response so far, the chances of a far worse outcome are
increasing by the day._” He continued: “Not even during the Great
Depression and World War II did the bulk of economic activity
literally shut down, as it has in China, the United States, and Europe
today. The _best_-case scenario would be a downturn that is more
severe than the [2008 financial crisis] (in terms of reduced
cumulative global output) but shorter-lived, allowing for a return to
positive growth by the fourth quarter of this year. In that case,
markets would start to recover when the light at the end of the tunnel
appears.”

Roubini expressed doubts that the best-case would occur, however. One
reason was that “the public-health response in advanced economies
has fallen far short of what is needed to contain the pandemic, and
the fiscal-policy package currently being debated is neither large nor
rapid enough to create the conditions for a timely recovery.”
Therefore, he concluded that “the risk of a new Great Depression,
worse than the original – a Greater Depression – is rising by the
day.”

A DEPRESSION DEFINED BY INSTITUTIONAL BOTTLENECKS AND HEALTH SECURITY
CHALLENGES

The bottlenecks in the economic/health system revolve around the
following: a) vaccine production, b) protective equipment
[[link removed]],
c) ventilators
[[link removed]] and
d) the design of workplaces. One way to respond to the failure of the
market and private capitalist system is to supplement it with another
kind of system that organizes supply or demand. A March 16, 2020 story
in _The Financial Times_ referred to Jagjit Chadha, director of the
National Institute for Economic and Social Research, “who said
policymakers could consider the kind of measures seen in a wartime
‘command economy’ — using spare capacity in manufacturing or the
hotel sector for efforts to fight the virus, or training people for
health work.”

The U.S. faces a critical shortage in protective masks because much
of production has been outsourced
[[link removed]].
Farhad Manjoo at _The New York Times_ described the shortage
[[link removed]] as
rooted in “a very American set of capitalist pathologies — the
rise and inevitable lure of low-cost overseas manufacturing, and a
strategic failure, at the national level and in the health care
industry, to consider seriously the cascading vulnerabilities that
flowed from the incentives to reduce costs.” In less polite terms,
transnational outsourcing corporations represent a Fifth Column, part
of a long-term
[[link removed]] trend
seen in how politicians and others have sold out the nation to
short-term profit making.

A report
[[link removed]] in _The
New York Times_ explains how the Command Economy could take the form
of a U.S. president using “the Defense Production Act “which was
passed by Congress at the outset of the Korean War and grants
presidents extraordinary powers to force American industries to ensure
the availability of critical equipment.” President Trump said
recently “that he had used the law to spur the production of
‘millions of masks,’ without offering evidence or specifics about
who was manufacturing them or when they would reach health workers.”

The _Times_ noted that when the Defense Production Act was
originally passed, it “granted President Harry S. Truman the power
to spur the production of aluminum, titanium and other needed
materials during wartime.” It has since “been used for both the
prevention of terrorism and to prepare for natural disasters.” While
some U.S. companies are cooperating with the Trump Adminstration
efforts, “without the Defense Production Act, the government will
lack the ability to channel these supplies to areas that need it most
— or to persuade companies to act quickly and without regard for
their profits.”

What does the “command economy” mean, however, when globalization
hollows out supply chains? How can the state bark orders at factories
that are so subject to vertical or horizontal disintegration that they
can’t deliver the goods? By March 27, _The New York Times
[[link removed]]_ reported
that President Trump threatened to “invoke the Defense Production
Act, which would enable the federal government to mobilize
privately-held companies to produce critically-needed supplies.”
Yet, it was “not clear that will speed the process.” In the case
of ventilators, their complexity means that they use “upwards of
1,500 unique parts from more than a dozen nations, and the
manufacturers say they will be limited in part by the availability of
parts.”

THE SOLUTION IS ECONOMIC AND POLITICAL REDESIGN

Returning to the question of ventilator production and the design of
workplaces, we confront various design questions. These questions
involve production design and political/economic design. When it comes
to Ford and GM making ventilators a recent report
[[link removed]] in _Politico_ noted:
“Automakers are offering up their factories to help solve the
shortage of ventilators needed to treat an expected crush of
coronavirus patients, but production likely won’t begin for months
— too late to help ease the immediate need.”

One key problem is the need for social distancing which requires
a _redesign_ of the assembly line. Flavio Volpe, head of the
Automotive Pars Manufacturers’ Association in Canada explained:
“If you were to start a new production line making medical goods,
from scratch, you could design [social distancing] into the line and
for a lot of these, they’ll have to be made in medical clean
rooms…You’re addressing, by definition, a whole bunch of the
concerns that employees have on the cleanliness and the spread in the
workforce.”

A German/Swiss Company called Schilling Engineering has a homepage
[[link removed]] in
which they profile different kinds of turnkey clean rooms. Here we see
very clearly a variety of clean room solutions which could be
developed for factories in the U.S. and elsewhere. Willis Whitfield,
an American, was the inventor of the clean room. A profile
[[link removed]] in _The
New York Times_ explains what he accomplished: “His clean rooms
blew air in from the ceiling and sucked it out from the floor. Filters
scrubbed the air before it entered the room. Gravity helped particles
exit. It might not seem like a complicated concept, but no one had
tried it before. The process could completely replace the air in the
room 10 times a minute. Particle detectors in Mr. Whitfield’s clean
rooms reported showing numbers so low — a thousand times lower than
other methods — that some people did not believe the readings, or
Mr. Whitfield.”

The development of a facility to make ventilators is not simply _a
production design_ problem. It is also _a political economic
design_ problem. By the auto industry’s own admission, they lack
proper cleanrooms such that there will be a production lag in
producing them. Where then could such clean rooms be found? Well, it
turns out that various countries have a number of such rooms only they
are designed to meet security needs which correspond often to threats
that are either: a) non-existent or b) exaggerated. I am of course
speaking of the so-called “defense industry.”

The _SOSCleanRoom
[[link removed]]_ site
explains the sectors having such cleanrooms as follows: “The optics
and defense industries use cleanrooms for many applications, including
microelectronic, biotech and pharmaceutical, and medical device[s].”
Such “applications also include things like chip making for
controlling missiles, radar and electronic components, laser
development for guidance systems and even biological components for
vaccines and test agents.” A 2010 study shows that cleanrooms
are not only used in the defense industry
[[link removed]],
but also in “biotechnology, microelectronics, pharmaceuticals and
nanotechnology.” They vary in “size from small to complex
multilevel structures with large serviced equipment and utilities.”

CONVERT THE DEFENSE AND PHARMACEUTICAL INDUSTRIES

The defense industry is a key sector because it utilizes many
cleanrooms and is vast in scale. The aerospace industry
[[link removed]] can
also make ventilators. Deloitte recently documented
[[link removed]] how
vast the defense industry is. On the global level, “defense
expenditure is expected to grow between 3 and 4 percent in 2020 to
reach an estimated US$1.9 trillion, as governments worldwide continue
to modernize and recapitalize their militaries.” Much of the growth
was “driven by increased defense spending in the United States, as
well as in other regions, such as China and India.” Here we have an
industry that already has many cleanrooms and the production capacity
to eventually convert to making other equipment in safe assembly
lines.

_While the U.S. and other governments should study the possibilities
for converting defense and other industries, one should also note that
the U.S. defense industry potentially is seeking further government
support_: “The U.S. aerospace and defense sector is feeling the
impact of the coronavirus, with companies limiting travel, defense
trade events scuttled and contingency planning underway.”
Politicians should leverage any defense industry requests for support
by demanding conversion in exchange.

In theory the U.S. defense industry should have been immune to shocks
in supply chains, but this industry has also gone global on certain
production items. _Defense News_ pointed to the U.S. Chamber of
Commerce’s Defense and Aerospace Export Council’s president, Keith
Webster who explained that “‘Buy-America’ regulations and other
controls mean the U.S. defense industry’s supply chains may be less
susceptible to disruption than some consumer sectors, where reliance
on China-made components is more widespread.” The F-35 fighter
aircraft is a supply chain that is very much “globally linked,”
however.

Thus, the globalization of defense production reveals the how economic
considerations hollow out the security of the U.S. and others seeking
cost savings. Yet, defense products were supposed to be “beyond
economic considerations” according to the dogma of many economists.
In this dogma, defense products meet “security considerations” and
thus we can’t talk about shifting budgets from military items
because these items are defined by security needs rather than economic
choices. Yet, our current use of defense or military resources
increasingly represents an economic, political and security
opportunity cost.

In 2018, the cleanroom-rich global pharmaceutical industry was worth
$1.2 trillion dollars according to statistics published
by _Statista_
[[link removed]].
Some of the capacity of this industry could in theory be converted to
more severely needed medical-related products. The pharmaceutical
industry, however, is part of the larger medical industrial complex
[[link removed]] which
has often acted against public interest. Barbara and John Ehrenreich
were among the first to address this sector in a 1970 book
entitled, _The American Health Empire: Power, Profits and Politics
[[link removed]]_.
In the 1960s there was a boom in health industries that was largely
based on “government subsidization of the market.” Over many years
the government “directly or indirectly fed dollars into the gaping
pockets of the dealers in human disease.” These payments include
direct funding for health care, education of health workers, hospital
construction, and tax deductions for individuals’ medical expenses.
The government has also aided “nonprofit hospitals” with tax
exemptions and supported basic chemical and biological research worth
billions of dollars. In 1966, Medicare and Medicaid, launched “the
biggest government subsidy of all.”

Much like the defense industry, which has received trillions of
dollars of government and taxpayer support over the years, the medical
industrial complex also represents a system that robs the public
interest. As the Ehrenreichs explained: “Much of the money which
flows through the delivery system to the health industry’s drug and
hospital supply and equipment companies never returns to the delivery
system in any medically useful form, or in any form at all.” As much
as “five to ten percent is raked off directly as profits, and these
by and large vanish into the larger economy, going to stockholders and
going to finance the companies’ expansions into other
enterprises.” Increasingly “health industry firms are
conglomerates, whose holdings in drugs or hospital supplies help
finance their acquisitions in cosmetics, catering, or pet food.”

SOME EARLY DATA ON OTHER INDUSTRIAL PLATFORMS

Some early data is available on alternative platforms for making
ventilators and other medical-related equipment. David E. Sanger,
Maggie Haberman and Zolan Kanno-Youngs at _The New York
Time_s reported on March 26th
[[link removed]] about
a joint venture production arrangement between auto giant General
Motors and Ventec Life Systems. The plan was originally expected to
lead to the production of up to 80,000 ventilators. In this plan,
General Motors (GM) would have retooled an automotive parts plant in
Kokomo, Ind. with the ventilators manufactured using Ventec’s
technology. The announcement about an actual deal was called because
“the Federal Emergency Management Agency said it needed more time to
assess whether the estimated cost was prohibitive.” In addition,
 government officials claimed “that an initial promise that the
joint venture could turn out 20,000 ventilators in short order had
shrunk to 7,500, with even that number in doubt.”

The joint venture provides us with many useful pieces of information
about the possibilities for GM to diversify. First, GM says
“there’s no issue with retooling,” i.e. there are no technical
diversification barriers. This assessment was shared by Ventec. GM has
expertise in manufacturing, purchasing and logistics which were viewed
as complementary capacities for Ventec. Nevertheless, FEMA believes it
“would have to select multiple manufacturers, in part to avoid the
risk that one production line runs into technical trouble.”

Second, the very plant selected by GM was closed in part because of
the corona crisis, i.e. the health bottleneck in production looms over
this plan: The plan was considered as GM’s “factory floor in
Kokomo was grinding to a halt and workers were being sent home —
partly because the market was collapsing but also because workers
would otherwise risk exposure to the coronavirus.” Similarly, FEMA
was also considering multiple production sites because of fears that
workers would “contract the very virus the ventilators are being
built to defeat.”

Third, past research
[[link removed]] suggests
that the government can be a key agent to steer and promote successful
diversification (by generating new markets and contributing to
performance specifications
[[link removed]]).
Yet, Sanger and his colleagues report that “the effort to produce
[ventilators] has been confused and disorganized.”

Fourth, one reason for delay in the GM-Ventec plan was its cost, yet
cost decisions have not stopped overly expensive military production
plans. As the _Times_ reported
[[link removed]]:
“The $1.5 billion price tag comes to around $18,000 a ventilator.
And the overall cost, by comparison, is roughly equal to buying 18
F-35s, the Pentagon’s most advanced fighter jet. Yet, just last
year
[[link removed]] _The
New York Times_ described the F-35s as “America’s Dysfunctional
Trillion Dollar Fighter-Jet Program.”

Fifth, the GM-Ventec deal reveals how parts of corporate America are
organizing politically to advance ventilator production. The two
companies joined a coalition of business executives
called StopTheSpread.org  [[link removed]]in
advancing the plan. The network’s homepage claims that “thousands
of CEOs, executives, and leaders around the country have committed to
#StopTheSpread of COVID-1.”

Finally, in contrast to the hang ups involving GM, innovators at
universities and elsewhere are already developing ventilators
[[link removed]] with
no apparent cost barrier or with designs that may not be cost
prohibitive. A _Sky News_ report
[[link removed]] described
how a team of persons from Oxford University and King’s College
London “took less than a week” to take a plan for a ventilator
“from the drawing board to working prototype, so that it can soon
help.” They cited Andrew Orr, an Oxford University engineer who said
“Sony confirmed that it could turn what is currently a jumble of
wires into a printed circuit board – and produce 5000 of them in a
week.” While it is too early to tell whether such efforts will be
sufficient, they do suggest the possibility that the big overhead
production model of GM should be complemented by other efforts to give
grants to a decentralized network of producers. Research by Charles
Perrow indicates that such a decentralized network
[[link removed]] could
address the vulnerability of a centralized production point.

SOCIAL AND ECONOMIC RECONSTRUCTION IS URGENTLY NEEDED

In sum, we need to begin to investigate how to convert both the
military and health industrial complexes to the urgent needs required
by the Coronavirus crisis. In Italy, the military has sent
technicians
[[link removed]] to
aid the production of ventilators. The logic of the health economic
crisis and StopTheSpread.org’s efforts both show how some parts of
the business and capitalist class, as well as millions of workers,
NGOs, and other groups now have a vested interest in the conversion of
another part of the capitalism system. Face-to-face food service
industries, industrial manufacturers, airlines, the tourist sector and
countless other business sectors whose livelihoods, profits and
employees have an immediate and dramatic interest in conversion. The
immediate question, however, is whether political and social movement
entrepreneurs can seize the opportunities presented by this crisis.

Progressive forces should focus more on how to exploit the looming
potential split among business groups rather than simply call for a
total redesign of the system outside any specific policy framework. In
contrast to an abstract set of proposals for remaking society, we need
to figure out how to build new institutional leverage points tied to:
a) conversion, b) alternative budget priorities and c) distribution of
grants to individuals or businesses. This incremental strategy can tie
into the large scale policy discussions that need to occur about
ratcheting up production of new health security production runs. One
opening is that British universities have begun to play a key role
[[link removed]] in
addressing the health production crisis by developing a ventilator
prototype.

Social and economic reconstruction involves the redesign of political,
economic and media spaces to advance public needs and interests. The
political is reconstructed to advance greater citizen participation
and representation. The economic is reconfigured to advance human
needs rather than simply profit and pollution
[[link removed]].
The media is reshaped such that participation and education take
preference over political marketing by various vested interests. In
addition to Barbara and John Ehrenreich, thinkers like Gar Alperovitz
[[link removed]], Barry
Commoner
[[link removed]], Seymour
Melman [[link removed]], Marcus Raskin
[[link removed]] and Simone Weil
[[link removed](Simone)/Oppression%20and%20Liberty.pdf],
as well as countless others, have each contributed to the ideas of
such reconstruction.

The new economic design and conversion changes we require depend on
political innovations. The left has been totally derelict in
advancing a politics of production
[[link removed]], with
a few notable exceptions
[[link removed]].
The right has been wedded to obsolete models of security, markets and
limited government. The critical failures of globalization are self
evident now. To move beyond these limitations, we need to advance a
new institutional platform that can transform media power into
political and ultimately economic power
[[link removed]].
There are various models for doing so
[[link removed]],
so one of the most urgent problems we face is the crippled political
imagination of the societies we live in. This imagination should link
cooperative and community ownership, the efforts of the Bernie Sanders
presidential campaign, and various other circuits of economic,
political and media power.

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