An Economic Breakdown

Recommended reading:

(Economic Change and Military Conflict from 1500 to 2000) – By Paul Kennedy (Random House)

On Page 55: “At the center of the Spanish decline, therefore, was the failure to recognize the importance of preserving the economic underpinnings of a powerful military machine. Time and again the wrong measures were adopted … the government directive that the Biscayan shipyards should concentrate upon large warships to the near exclusion of smaller, more useful trading vessel;”

And on Page 530: “More narrowly, there could be serious implications for American grand strategy if its industrial base continued to shrink. Were there ever to be a large-scale future war which remained conventional (because of the belligerent’s mutual fear of triggering a nuclear holocaust), then one is bound to wonder what the impact upon U.S. productive capacities would be after years of decline in certain key industries, the erosion of blue-collar employment, and so on …

“Even so, the very high proportion of, say, semiconductors which are assembled in foreign countries and then shipped to the United States, or – to think of a product as far removed from semiconductors as possible – the erosion of the American shipping and shipbuilding industry, or the closing down of so many American mines and oilfields – such trends cannot be but damaging in the event of another long-lasting, Great Power, coalition war. If, moreover, historical precedents are of any validity at all, the most critical constraint upon any ‘surge’ in wartime production has usually been in the area of skilled craftsmen – which, once again, causes one to wonder about the massive long-term decline in American blue-collar (i.e., usually skilled craftsmen) employment.” –

Mr. Kennedy says exactly what we’ve been saying in our Trends & Developments commentaries:

1. Vol. XV, Art. 35: “In past commentaries we’ve discussed the only possible way of reversing this country’s free fall. Starting from the bottom, a number of nations have advanced with astonishing strides, and like Portugal, Spain, the Netherlands and the British Empire in earlier times, these emerging nations are now in positions of prominence. First, post-war Japan, them post-war Korea, and now China and India, each in turn recognizing that a strong maritime presence inevitably leads to national wealth. And in happier times wasn’t it our enormous merchant fleet that enabled us to become an economic superpower?

“But of course we can’t build a new merchant fleet. We’d have to pay the hired help too much. Somehow … somehow … the honchos running this country came to the conclusion that it would be to our advantage to allow the overseas competition to pick up all the marbles. We’d let them build all the container ships and we’d just pay them for whatever services we needed. That’s right. We decided to pay their workers rather than our own shipbuilders. We now know that this asinine strategy has put us in a hole that’s getting deeper by the day.

“But those honchos and their ilk are still with us, unfortunately. But so is Title XI of the Merchant Marine Act. And so is the patent we own – the patent we’ve been assured will ‘revolutionize the world’s economy’. Blinders and ignorance are all that block our economic recovery.”

2. Vol. XVIII, Art. 4: “Maybe yesterday’s claim that building patented container ships ‘will prove to be the impetus for not only our economic recovery but also that of the entire world’ wasn’t so ‘bold and brazen’ after all.

“That cooperative international effort we envisioned is becoming more attractive by the minute:
– Millions of U. S. workers building patented container ships, so that …
– Millions (billions?) of Chinese workers can produce goods … demanded by U.S. consumers with new-found buying power … to be shipped aboard those U.S.-built vessels, so that …
– U.S. buyers … the catalysts in the world’s economy … can satisfy their shopping appetites.”

3. Vol. XVIII, Art. 16: “Americans desperately need jobs but as a ‘service-oriented’ society we are no longer inclined toward menial labor, like building ships for instance. But shipbuilding was always our strong point, and years ago our innovators gave our technology to the rest of the world. So overseas workers are now building low-cost, unsophisticated, profitable container ships and, believe it or not, we’re paying them to do it. Meanwhile, we’re building an exorbitantly-priced, highly-sophisticated, unprofitable 313-ship navy, and we’re paying for that, too … but we get no return on our investment (ROI). For example, we’re building ‘cargo’ warships for about $ 500 million per copy, and instead of getting a return on investment, taxpayers get stuck with the annual operating costs of these vessels.

“We could have built ten profitable container ships for each $ 500 million, and the ROI would have been considerable. And so would the weekly paychecks.”

4. And way back in Vol. IV, Art. 18 we showed our concern for a reasonably adequate Navy:

“Before you raise the objection that the U.S. worker cannot compete with foreign labor, let us remind you that U.S. workers at Kvaerner’s shipyard in Philadelphia are doing just fine, thank you. And an even more important consideration is the fact that these patented container ships of ours are … ours. No one could come in with a competitive price because the U.S. owner of the worldwide patents would exclude foreign shipbuilders. Who would be the beneficiaries of this economic cornucopia? All those behind the protective shield of the Jones Act. It amounts to a win-win situation.

“And before you raise the objection that this program would weaken our first line of defense – the Navy – think about this:
– Our shipbuilding capabilities will be greatly expanded as a result of the stimulus our patented design gives to our struggling U.S. yards.
– The number of trained shipyard workers will be significantly increased because of the employment opportunities generated by our revived commercial shipbuilding program.
– The resulting boost to the nation’s economy will allow more taxpayer dollars to be assigned to our national defense … and for the first time ever, the construction of new carriers, submarines and DDXs will be quite affordable …”