Saturday, July 30, 2005

All Out Effort?

Parameters: National Mobilization:An Option in Future Conflicts?

Following the terrorist attacks of 9/11, some commentators drew a parallel between al Qaeda’s strike and Japan’s bombing of Pearl Harbor, and between the ensuing struggle and the Second World War. There was sporadic talk of mobilization, which was easily enough dismissed as out of step with the realities of the War on Terror. Unconventional warfighters like terrorists are by definition immune to the massive concentrations of power that are the traditional object of a mobilization. At the same time, conventional war is generally regarded as oriented toward smaller, more professional, and high-tech forces fighting in “demassified” conflicts. However, despite a great deal of hand-wringing on the part of social critics, the really difficult question was not asked: Would a World War II-scale mobilization even have been possible after 9/11 if it had been deemed an appropriate response?


Mobilizing in the Post-Industrial Era

It may seem counterintuitive to question the capability of today’s advanced economies to mobilize relative to where they stood a half century or more ago when they were much smaller and less sophisticated. In 2002 the US economy was ten times as large as it was in 1940, and roughly five times as large as it was in 1945.5 Nevertheless, that growth has partially been fueled by changes which are trade-offs from the standpoint of mobilization.

The first is that geography offers less advantage today than it did in the 1940s, as the case of the United States makes clear. The fact that the United States was richly endowed with natural resources and physically isolated from the main World War II battlefronts by two oceans allowed its industrial base to mobilize unimpeded by fighting, in contrast with Britain or Japan, each dependent on vulnerable sea lanes, or Germany, subjected to strategic bombing. A greater reliance today on imported natural resources and manufacturing practices dependent on outsourced components makes the United States much more susceptible to such interference. This goes not only for attacks by an adversary, but the precautions involved in tightening up the borders, as demonstrated in the wake of 9/11. “Transportation issues played havoc with order flows and drove up shipping costs,” and the plants practicing just-in-time manufacturing, like those belonging to Ford, Honda, and Toyota, came to a halt.6 At the macroeconomic level the result was a one-percent drop in American industrial production, largely due to the disruption of industry in the week before a semblance of normality returned.

Changes in military technology also make it more difficult for the United States to insulate itself from a conflict abroad. Long-range aircraft and missiles permit attacks on the US homeland. This includes not only strategic forces like those of Russia and China, but the prospect of crude cruise missiles launched from offshore freighters by smaller opponents, a feat arguably within the reach of terrorist groups. It also includes the widened possibilities for infiltration and attack by saboteurs, terrorists, and special forces units, given easier transport and more effective, compact weapons, even if they do not possess weapons of mass destruction. A sophisticated adversary could dispatch a large number of such teams to infiltrate the United States and cause havoc in wartime, a threat against which elaborate missile defense schemes would be useless. Computer attacks, similarly, are undeterred by distance, and attacks by single viruses in the past, like the “Love Bug,” are estimated to have caused billions of dollars in damages. Should such attacks be staged by a large, determined force of cyberwarriors rather than a single cracker, the damage to the economy could be substantially greater.

Second, several studies in recent decades have pointed to a neglect of traditional manufacturing and heavy industry as a problem.7 Manufacturing now provides 14 percent of America’s Gross Domestic Product (GDP), rather than the nearly 27 percent it provided in the aftermath of World War II.8 Indeed, the problem of the United States in the 1930s was underutilization of its vast industrial capacity, due to a lack of demand. Factories were left at a standstill and a quarter of the labor force out of work in the Great Depression. With the war effort providing new demand, America’s economic output grew 75 percent during the conflict, after adjustment for inflation. By contrast, a recent RAND Corporation report has noted that should it become necessary for the US Army to equip and arm more than the 26 heavy divisions for which equipment is already available, the lack of industrial capacity would represent the biggest problem for further expansion.9


Third, critics have frequently pointed to diminished civic militarism as an obstacle to such efforts, noting the formidable political resistance among citizens to paying higher taxes or serving in the military. The widespread support for military action following the 9/11 attacks did not translate into an equally widespread willingness among Americans to enlist, or make conscription less unthinkable politically.This trend is variously attributed to a culture of consumption and self-indulgence, the “law of the increasing cost of war,” cultural change from the 1960s on, a lack of leadership on the part of elites generally eschewing military service, or some combination of these factors.


Slack and Mobilization

While commonly discussed in a much more limited sense, the concept of slack carries over to entire societies, which depend on untapped human and material resources for pursuing new endeavors or meeting emergencies. The level of governmental activity as a part of overall societal activity—specifically its patterns of taxation, spending, and debt—offers a guide to how much slack a society has. The reason is simple. Endeavors like mobilization represent an abrupt enlargement of government spending, and have to be paid for by redirecting the nation’s resources, typically by raising taxes or borrowing money. Looking at how much a government taxes, spends, or owes in relative terms under normal circumstances gives a clue to what resources are not being exploited at the time, and therefore how much more it might be able to do in the event of an emergency. A higher level of untaxed income, lower spending levels, and a lower debt burden are representative of greater slack, and vice-versa.

Given the popularity of comparisons of the present with World War II, during the last two years of which the United States devoted 37 percent of its national income to the war effort, it would be useful to contrast today’s fiscal situation with that era’s. Gross debt was equal to 52.4 percent of US Gross Domestic Product in 1940, and that was after a decade of economic contraction in the Great Depression. By contrast it was 60 percent in 2002 at the end of a prolonged economic boom and years of what were by some measures budget surpluses—unusually good times in the view of economists, rather than unusually bad ones. More important, overall tax levels were far lower. Federal revenue levels in 1940 were 6.8 percent of GDP, compared with 18 to 20 percent of GDP in recent decades, or three times as much.


By contrast the national debt spiked upward sharply in the 1980s, with defense expenditures at levels of only 5 to 6.5 percent of GDP, these relatively lower expenditures apparently less supportable than the higher spending of a decade or two earlier. It took World War I to turn Britain from a creditor nation into a debtor nation. The 1980s, with their comparatively much lower level of strain, were sufficient to effect that transformation for the United States. The short-lived fiscal optimism of the late 1990s aside, it is clear that any conceivable combination of defense cuts and economic growth would be insufficient to pay down the debt the United States accumulated during the late Cold War. Moreover, today defense spending in the area of only four percent of GDP goes along with budget deficits and increases in the debt comparable to those of the 1980s.

The heightening of security spending since 9/11 is responsible for only a fraction of recent deficits (about a fourth of it, according to one estimate), but that this spending is contributing to the debt is still indicative of the problem of a tighter fiscal situation. Additionally, consistent with this picture, the direction in which the US economy is moving is toward more spending, more debt, and, at least proportionately, less slack, for a number of reasons which have nothing to do with the War on Terror. The most widely discussed of these is the pressure which aging populations are putting on the social safety net, already a major driver of deficit growth.21 The federal debt is expected to almost double to $11.8 trillion by 2013, at which time the retirement of the baby boomers could send the debt spiraling still higher. By 2030, spending on the elderly could rise by 80 percent relative to national income, threatening peacetime deficits dwarfing those of the 1980s or today.22 Such straight-line projections have their limitations, but today it is difficult to conceive of alternative scenarios given the drivers of such change. Social Security payouts aside, essential services like health care are becoming more expensive relative to income.23 Also consistent with a trend toward older populations, though not entirely due to it, savings rates have declined24 and private debt has risen,25 placing other strains on the tax base. No one expects the cost of health care to drop in the foreseeable future, or the trend toward an older population to reverse itself, but the contrary.

Another reason which should not be overlooked is the rate of economic growth, so crucial to absorbing and recovering from shocks, as after World War II. Despite the hype about a global economy turbo-charged by integration and information technology, epitomized by authors like Thomas Friedman, world economic growth has actually slowed in recent decades. The rate of world GDP expansion fell from 5.3 percent a year in the 1960s to 3.9 percent in the 1970s, 3.2 percent in the 1980s, and only 2.3 percent in the 1990s.26

This pattern has been evident throughout the developed as well as the undeveloped states, so that it cannot be explained away as simply an object lesson in the advantages of backwardness, or the gap between “competitive and noncompetitive” states. Certainly, China’s and India’s comparative underdevelopment is a strong contributor to their high growth rates, and US competitiveness explains its having stronger growth than Europe and Japan.....


Of course it is frequently claimed that should the need arise, the United States could muster the political will to raise taxes or slash spending in other areas. However, an honest look at the historical record shows that partisan and domestic politics have not simply been swept aside in the name of national interest during mobilizations, even in the 1940s. Where taxes are concerned, the fact remains that today’s tax levels are broadly equivalent to those levied during the Second World War. Federal revenue levels peaked at 20.9 percent of GDP in 1944, compared with the 20 percent raised in peacetime in recent years. The political challenges facing those who would rewrite the bills authorizing mandatory spending, particularly those affecting the elderly, need no elaboration. Rather than a tax hike or Social Security reform, what has materialized thus far in this decade is a sizable tax cut and the passage of a prescription drug benefit for Medicare recipients, the largest entitlement since the Great Society programs of the 1960s. Moreover, according to the various explanations given by observers concerned with the economic and fiscal picture, this may be the rule and not the exception in the years to come.

In short, the United States of World War II and most of the Cold War was a substantially less-taxed, lower spending, and less indebted society than today’s, giving it more fiscal slack on which to draw in the event of an emergency. Along with its higher rate of economic growth, this enabled a rapid fiscal recovery after the spending surge. There was little sign of this happening after the Cold War, and even less than that today with deficits of $400 to $600 billion a year projected for the next several years, and which will grow greater still as the baby boomers retire. It would be going much too far to say that this makes a substantially enlarged military or even outright mobilization impossible, but it is safe to say that it makes it harder to come by the necessary resources. Since it would be more difficult to raise taxes today than in the 1940s, more of the money needed to sustain a war effort would have to be borrowed. These additional loans would come on top of a rising structural deficit and higher debt burden, as is happening today.


In other words, the United States, aside from still enjoying by far the largest economy, remains a faster-growing, less indebted society than the other technologically advanced nations, and this is likely to remain the case for the foreseeable future. The stresses posed by aging populations and the like are also milder in the case of the United States than in Japan or Europe, with their older populations, earlier retirement, and more generous benefits. Of course this leaves open the question of China, said to be rapidly becoming “the workshop of the world.” The hype surrounding China’s economic expansion, however, tends to minimize its significant problems, such as its own aging population, insolvent banking system, growing reliance on costly energy imports, and mounting debt. The statistics reporting ten percent growth are notoriously spotty, and numerous observers suggest they have been exaggerated for years. Even were they accurate, such growth rates cannot be sustained forever and will likely fall dramatically before China attains a per-capita income remotely comparable to that of the United States or other industrialized nations. This may make it less likely to be a peer competitor to the United States anytime soon than is widely imagined.


The question of just what a developed economy can or cannot do, of course, is by no means a simple one. Nevertheless, a look at the key facts—such as changes in economic structures, technology, and cultural attitudes—raises serious questions about the capacity of the United States to mobilize to meet security needs. The crucial factor may be that the slack required for sustaining a military mobilization is gradually being depleted, at least as measured by slowing economic growth and the worsening fiscal picture for the United States and other major nations. If this is problematic today, it is likely to be far worse by 2020 or 2030, given current trends. It also should be noted that this disappearing slack additionally affects the ability of the United States to respond to other problems or seize other opportunities, like undertaking an ambitious program of space exploration or coping with an environmental disaster.


The United States consequently will retain a position of leadership indefinitely, in large part because of the weakness of other states, including China. Nonetheless, while America’s tax, spending, and debt levels remain below those of most other advanced states, and its economic growth rate higher, the overall trends are cause for concern. The United States, less able to count on the means of its allies even when they are willing, needs to acknowledge the limits of its own resources in providing for security at home and abroad.

Again, as was the case in the late 1980s, America’s finances must be seen as a security issue as well as an economic one. While defense spending now plays only a partial role in alleviating or increasing the present and future fiscal difficulties, those fiscal problems must be recognized as limiting how much of a burden the United States could take on in the future. The danger of “overstretch,” highlighted by the nearly singlehanded conduct of the war in Iraq, should not be lightly dismissed. It is certainly true that the United States can hardly escape involvement abroad. Nevertheless, at a minimum, a conservatism toward acquiring additional commitments is overdue.

The whole article is very worth a read. This does not just affect defense but also our ability to respond to an energy crisis or depression. One point not raised by the author, but by others, is that the increased number of women in the workplace means there are less spare workers laying around to make up for the manpower drain of conscription. To be sure the increased lifespan and health of our retirees perhaps offers another form of slack in the employment marker. If the "alarmists" are right about peak oil we'd be hard pressed to retool our crumbling infrastructure to be less petroleum based.

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