Updated November 11, 2016
Economic Mobilization Now!
Sometimes it is necessary for a nation to launch a full-scale mobilization of its economy. In history so far this has occurred mainly during wartime, or in preparation for a possible war, in order to rapidly expand the production of armaments and other supplies needed for warfighting and defense. Today many nations of the world are faced with the need for a very different kind of mobilization: a mobilization which is necessary in order to reverse the accelerating process of social, economic and political disintegration which is threatening the very existence of civilized society. Instead of weapons, nations like Brazil need tens of millions of new decently-paid jobs. They need to transform impoverished and run-down urban and rural areas into places where people can live with dignity and health, with modern housing, sanitation, schools and hospitals, efficient public transportation and other essential services. They need to modernize and expand their vital infrastructure using the technologies of the 21st century. They need to rapidly upgrade the educational level of the population, including drastically expanding access to cost-free higher education. All of these things require mobilizing the manpower and productive resources of the country in a systematic way.
In contrast to what most often occurs in wartime, the economic mobilization needed today does not require dictatorial measures in a political sense. It does, however, mean liberating the country from the grip of neoliberal policies which have permitted a brutal pillage of nations in the name of “freedom of markets”. Above all it means changing the way the government, entrepreneurs and the population think about economics. It means launching a serious public discussion in order to reach a sufficient degree of political consensus about what must be done.
The comparison with a military mobilization is instructive for several reasons. The fact that the survival and future of the country is at stake, makes it urgently necessary to think clearly, to throw away illusions, to focus on priorities and not to waste precious time and effort on secondary or tertiary issues. It forces people to think in terms of common interests, to think in terms of achieving a victory for the whole society, instead of one group trying to gain advantages at the expense of others. If an economic mobilization is organized properly, then virtually everybody will be a “winner”. The main priority is not to redistribute existing wealth, but rather to rapidly expand the real wealth of the nation, while at the same time insuring that the largest part of the increase goes into improving the real standards of living, education, health and employment for the masses of the population.
Perhaps the biggest obstacle lies in the fact that most people nowadays think about economics and about wealth mainly in terms of money. People tend to think that lack of money is the cause of their economic problems: too little money for investment, too little money for consumption, not enough money for education and infrastructure etc. Politicians try to become popular by promissing more money for various activities, more money for the poor or even more money for everyone. Economic debates focus on prices, income, profits, debt, taxes, trade balances, government expenditures etc. Stupidly, the success or failure of economic policies are judged according to the growth of GDP – a misleading measure based on market prices, and which makes no distinction between the production of food, for example, and income derived from real estate or gambling casinos. People tend to forget that money is just paper or, in the era of computerized transactions, just bytes of information.
Certainly, money is an indispensible instrument of economic activity; money mediates the millions of exchanges, agreements and decisions made every day. But we cannot eat money, we cannot build houses, factories or airplanes from money; money does not cure diseases or provide people with an education. Obviously, all these things must be produced, generated, built up and maintained by real physical processes – by processes of transformation of matter and energy in agriculture, industry, transport and other forms of physical activity, by applications of science and technology, and above all by the physical and mental labor of concrete human beings whose lives and activity depend on a constant supply of goods and services. This is the real economy – the physical economy – as opposed to the “virtual world” of financial transactions. Hardly anyone would disagree; but when it comes to politics and daily life, people nearly always think of economics in terms of money.
Suppose, for example, that a given region urgently requires the construction of additional roads, sanitation infrastructure, expansion of the electricity network, schools and medical facilities etc. Somebody makes a list of the 20 most important projects. Everybody agrees that they are long overdue. So what is the problem? Typically people will answer: “These projects are necessary, but unfortunately there is no money for them”. But from the standpoint of physical economy, this sort of reasoning is absurd. What people should ask, first, are the following sorts of questions: “Do we have enough manpower available in the region (or country) to carry out these projects? Do we have a sufficient supply of construction materials? Do we have the necessary machinery? Or if not, can we produce them? How long will that take? Do we have the necessary technology and technological know-how?” etc.
In other words, the first crucial issue is to determine whether the region or nation has the physical means (including manpower) necessary to realize the given projects, while at the same time maintaining all the other activities which the economy requires. To address these questions in a fully adequate manner, we need an overview of the way in which the nation’s economy as a whole is produces and utilizes its productive resources – its physical investment cycle. That includes determining whether the economy is generating a net “physical profit” in terms of expanding the real productive resources available for its development. If not, i.e. if the economy is contracting in real physical terms, then we have to discover a way to change the situation. Naturally it is relevant, in this context, to estimate the likely impact of a given set of projects on the potential of the economy to generate an increasing physical profit in the future. That impact depends not only on the projects themselves, but on the overall trajectory of development of the economy as a whole. The developmental trajectory can be analyzed in terms of changes in input-output relations among the sectors and subsectors of the economy, in which a key role is played by the utilization of manpower and other productive resources as well as the level of technology employed.
All the major nations in the world today possess gigantic amounts of productive resources which are either not used, or are used very badly. With suitable economic policies, these resources could be transformed into a powerful “fuel” for recovery and expansion of the real economy. The Number One productive resource is naturally the workforce of the nation, including those who are unemployed, underemployed or belong to the category of “hidden unemployment”. In typical so-called developing countries, for example, tens of millions of people are living in slums, without decent housing and sanitation, with huge numbers of young adults sitting around with nothing to do. Why not engage them in the work of rebuilding their own neighborhoods, and in other urgent tasks which society requires? The central focus of any economic mobilization must be to unleash the creative, productive potential of the nation’s population.
These issues are addressed in detail in my book on the Physical Economy of National Development. The main point to be emphasized here, is that the essential issues have nothing to do with money! Once a project has been properly designed and judged to be feasible and desirable in physical-economic terms, financing is essentially a technical question. Providing an adequate general framework for solving the problem requires that the financial system and financial policies of a nation be strictly subordinated to the requirements of the physical economy. That, in turn, means discarding the presently dominant neo-liberal models. In my book I argue – and illustrate using examples from the history of a number of leading nations – that any trajectory of economic development, which is feasible in physical, technological and human resource terms, can in principle be financed. The main obstacles are political and subjective in nature. This brings us back to the concept of mobilization, which I emphasized at the beginning of the present article.
In this respect some valuable lessons can be learned from the economic mobilization of the United States in World War II. It should be recalled that from an economic, financial and social point of view the United States was in a rather bad condition before the mobilization. The so-called “New Deal” policy had overcome some of the worst effects of the “Great Depression”, but economic recovery was sluggish. In fact, the Great Depression did not really end until the war mobilization. In 1935 Eleanor Roosevelt, wife of the U.S. President, described the situation of young people in the country, in a way that would apply in many nations today. She declared in an interview: "I live in real terror when I think we may be losing this generation. We have got to bring these young people into the active life of the community and make them feel that they are necessary." There was a severe recession in 1937-1938. In 1939 official unemployment was still over 17% , the capacity utilization in industry was only 72%. The national income and the indices of agricultural production and industrial production were still lower than they had been before the Depression hit.
The miserable situation continued up to the powerful shock created by the Japanese attack on the U.S. fleet in Pearl Harbor on December 7, 1941. This shock, followed by the U.S. Declarations of War against Germany and Japan, radically transformed the subjective attitude of the population, laying the basis for one of the greatest economic mobilizations in history. “Powerful enemies must be out-fought and out-produced,” President Franklin Roosevelt told Congress on January 5, 1942, less than a month after Pearl Harbor. “It is not enough to turn out just a few more planes, a few more tanks, a few more guns, a few more ships than can be turned out by our enemies,” he said. “We must out-produce them overwhelmingly, so that there can be no question of our ability to provide a crushing superiority of equipment in any theatre of the world war.” The economic mobilization was well-organized, followed the principles of physical economy and profitted from a close symbiosis of government and innovative private industry. In the ensuing period up to the end of the war, the total output of manufactured goods in the U.S. increased by 300 percent. Labor productivity soared. A crucial role was played by the widespread introduction of new capital equipment into industry, new production methods and a very effective system of dissemination of information and technology. From the subjective side the common cause of winning the war energized and united the population. In contrast to many other cases, the war mobilization did not weaken the civilian economy; on the contrary, it laid the basis for the huge economic boom which occurred in the United States after the end of the war.
Today the shocks generated by the deepening crisis worldwide, provide a unique opportunity for nations to mobilize their economies, to unleash the creative energies of the population and to rapidly improve the objective and subjective conditions of people’s lives, based on their own labor. This will be a mobilization for peace, rather than for war: a mobilization to reverse the downward spiral of social, economic and political disintegration which is afflicting much of the world today.