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Economic conversion, defence conversion, or arms conversion, is a technical, economic and political process for moving from military to civilian markets. Economic conversion takes place on several levels and can be applied to different organizations. In terms of levels (roughly corresponding to geographic scales), conversion can take place at the level of new innovation projects, divisions within multi-divisional firms, companies, and national economies. In terms of objects, conversion can govern workers (i.e. retraining), firms (in terms of workers, capital, facilities and real estate) and land (in terms of real estate). Some of these scales obviously overlap. Organizations that can be converted include defense firms, military bases, and defense laboratories.
Conversion should be distinguished from economic diversification although the two processes overlap. Conversion involves the maximum reuse of military committed resources, with the emphasis on reuse of existing personnel. The key personnel within defense firms are engineers and factory workers, and managers skilled in managing innovations. Another key emphasis in conversion is in the area of new product development. Diversification can involve financial manipulation, e.g. in purchasing new firms, which leaves in place existing commitments to military production. Sometimes however, economic conversion requires purchase of another firm to supply "complementary capacities." Generally, conversion can be supported by various factors that help defense firms overcome specialization.
Among the key periods associated with economic conversion have been the postwar conversion after World War II, numerous experiments in diversification (with conversion of defense engineers' skills) in the period after the Vietnam War in the 1970s, and similar efforts after the Cold War. Various militarist and corporate critics battled labor and peace advocates during these conversion openings, with the former usually winning the day.
During the '50s, Western citizens and policymakers were impressed by the extensive impact on everyday life of civilian applications derived from military technologies, which were developed during the last years of the World War II. This happened within an institutional framework in which military and civilian Research and Development activities were separated, and the allocation of public and private resources was primarily addressed towards to the military needs and the priorities of national security systems. [1]
Since the 1960s, the military (deficit) spending was followed in Western countries by a large debate on the conversion from military to civilian industrial and technological activities. Two decades later, the issue on what was the existing hierarchy between the military and civilian R&D, was widely overcome by the concept of “dual-use” technologies, suggesting that military industrial farms and their products could be somewhere used for civilian purposes, and vice versa. [1]
Conversion (Russian: Конверсия — Konversiya ) became a deliberate economic strategy of Mikhail Gorbachev in the final years of the Soviet Union, as he pursued large decreases in military spending. [2] This was not particularly effective during his time in office, but saw better results in post-Soviet Russia. [3]
Since the beginning of the Clinton's presidency in 1993, the American hi-tech companies were allowed to export a wide range of their products all over the world without prior Government approval. The new trade policies fostered the interchange with China, but ignored their long-term impact for national security and the need of intelligence agencies and government officials to track how those technologies were effectively used and to avoid them be improperly diverted to terrorista or frign military uses. [4]
In the contemporary period, from the late 1990s to the present day (circa 2010) the prospects for conversion have been constrained by regional conflicts, the so-called "War on Terror," and consolidation within the defense industry through mergers, acquisitions and regional production networks. These barriers have decreased the incentives to shift into civilian markets for various firms, except for those more on the periphery of defense acquisition. Nevertheless, the potential debate over mega military systems like specific jet fighter programs or Trident (in the U.K.) as well as an overall climate of fiscal austerity might pressure or encourage some military firms to go civilian. Arms control agreements related to nuclear weapons might also lower the projected demand for some military suppliers. Ultimately, the extension of civilian markets for defense firms might be encouraged by building up the demand for civilian industrial markets like mass transit, alternative energy and sustainable, civilian infrastructure.
In modern times, a key figure in promoting the idea of economic conversion was the late Seymour Melman (1917–2004), a professor at Columbia University in the United States. In recent times, the idea has also been promoted by various scholars and activists, particularly during the 1980s and 1990s, in Europe, the United States, Israel and South Africa. Following the end of the Cold War, great attention was placed on the prospects for economic conversion.
Regarding differences in the 1970s and the postwar era, Seymour Melman noted that: "The problem of conversion from military to civilian work is fundamentally different now from the problem that existed after World War II. At that time, the issue was reconversion; the firms could and did go back to doing the work they had been involved in before the war. They could literally draw the olds sets of blueprints and tools from the shelf and go to work on the old products. At the present time, the bulk of military production is concentrated in industries, firms, or plants that have been specialized for this work, and frequently have no prior history of civilian work" (The Defense Economy, 1970: 7).
Detailed empirical studies conducted by Seymour Melman, John Ullmann, Lloyd J. Dumas, Catherine Hill, Greg Bischak, Ann Markusen, Michael Oden, Jonathan Michael Feldman, and others have shown the technical or economic viability of economic conversion. After the September 11, 2001 attacks and concentrated political power directed towards military-serving interests, the obstacles to conversion have been considerable. Extensive political barriers suggest that conversion promotion requires various forms of institutional transformation and social movement mobilization.
To be successful, conversion must be part of a larger political program involving, military budget reductions, reindustrialization, and infrastructure renewal. For example, if a given defense firm should convert, its production could be easily replaced by output from another firm. Marcus Raskin at the Institute for Policy Studies in Washington, D.C. has developed such a draft treaty for comprehensive disarmament.
Disarmament is the act of reducing, limiting, or abolishing weapons. Disarmament generally refers to a country's military or specific type of weaponry. Disarmament is often taken to mean total elimination of weapons of mass destruction, such as nuclear arms. General and Complete Disarmament was defined by the United Nations General Assembly as the elimination of all WMD, coupled with the “balanced reduction of armed forces and conventional armaments, based on the principle of undiminished security of the parties with a view to promoting or enhancing stability at a lower military level, taking into account the need of all States to protect their security.”
The military–industrial complex (MIC) is a phrase originally coined by U.S. President Dwight D. Eisenhower to describe the relationship between the military and the defense industry that supplies it with weapons, equipment, and services.
Seymour Melman was an American professor emeritus of industrial engineering and operations research at Columbia University's Fu Foundation School of Engineering and Applied Science.
A war economy or wartime economy is the set of contingencies undertaken by a modern state to mobilize its economy for war production. Philippe Le Billon describes a war economy as a "system of producing, mobilizing and allocating resources to sustain the violence." Some measures taken include the increasing of interest rates as well as the introduction of resource allocation programs. Approaches to the reconfiguration of the economy differ from country to country.
The arms industry, also known as the defense industry, military industry, or the arms trade, is a global industry which manufactures and sells weapons and other military technology to a variety of customers, including the armed forces of states and civilian individuals and organizations. Products of the arms industry include weapons, munitions, weapons platforms, communications systems, and other electronics, and related equipment. The arms industry also provides defense-related services, such as logistical and operational support. As a matter of policy, many governments of industrialized countries maintain or support a network of organizations, facilities, and resources to produce weapons and equipment for their military forces. This is often referred to as a defense industrial base. Entities involved in arms production for military purposes vary widely, and include private sector commercial firms, state-owned enterprises and public sector organizations, and scientific and academic institutions. Such entities perform a wide variety of functions, including research and development, engineering, production, and servicing of military material, equipment, and facilities. The weapons they produce are often made, maintained, and stored in arsenals.
Demilitarisation or demilitarization may mean the reduction of state armed forces; it is the opposite of militarisation in many respects. For instance, the demilitarisation of Northern Ireland entailed the reduction of British security and military apparatuses. Demilitarisation in this sense is usually the result of a peace treaty ending a war or a major conflict. The principle is distinguished from demobilisation, which refers to the drastic voluntary reduction in the size of a victorious army.
Military Keynesianism is an economic policy based on the position that government should raise military spending to boost economic growth. It is a fiscal stimulus policy as advocated by John Maynard Keynes. But where Keynes advocated increasing public spending on socially useful items, additional public spending is allocated to the arms industry, the area of defense being that over which the executive exercises greater discretionary power. Typical examples of such policies are Nazi Germany, or the United States during and after World War II, during the presidencies of Franklin D. Roosevelt and Harry S. Truman. This type of economy is linked to the interdependence between welfare and warfare states, in which the latter feeds the former, in a potentially unlimited spiral. The term is often used pejoratively to refer to politicians who apparently reject Keynesian economics, but use Keynesian arguments in support of excessive military spending.
The Japanese defense industry is the part of the Japanese economy responsible for the procurement of military technology, primarily for the nation's own Self-Defense Forces, largely due to a strict policy on national exports.
The National Commission for Economic Conversion and Disarmament was founded in 1988, with preliminary work starting as early as November 1987. The key principals behind the commission were Seymour Melman together with Jonathan Feldman and Robert Krinsky. The three, conceived of the commission as the extension of conversion activities, initiated at Columbia University linked to the Corliss Lamont Fellowship program in Economic Conversion and Disarmament.
The military history of Europe refers to the history of warfare on the European continent. From the beginning of the modern era to the second half of the 20th century, European militaries possessed a significant technological advantage, allowing its states to pursue policies of expansionism and colonization until the Cold War period. European militaries in between the fifteenth century and the modern period were able to conquer or subjugate almost every other nation in the world. Since the end of the Cold War, the European security environment has been characterized by structural dominance of the United States through its NATO commitments to the defense of Europe, as European states have sought to reap the 'peace dividend' occasioned by the end of the Cold War and reduce defense expenditures. European militaries now mostly undertake power projection missions outside the European continent. Recent military conflicts involving European nations include the 2001 War in Afghanistan, the 2003 War in Iraq, the 2011 NATO Campaign in Libya, and various other engagements in the Balkan and on the African continent. After 2014, the Russian annexation of Crimea and the ongoing Russo-Ukrainian War prompted renewed scholarly interest into European military affairs. For further the context see History of Europe.
The industrial plans for Germany were designs the Allies of World War II considered imposing on Germany in the Aftermath of World War II to reduce and manage Germany's industrial capacity.
The Office of Defense Mobilization (ODM) was an independent agency of the United States government whose function was to plan, coordinate, direct and control all wartime mobilization activities of the federal government, including manpower, economic stabilization, and transport operations. It was established in 1950, and for three years was one of the most powerful agencies in the federal government. It merged with other agencies in 1958 to become the Office of Civil and Defense Mobilization (1958–1961).
Economic reconstruction is a process for creating a proactive vision of economic change. The most basic idea is that problems in the economy, such as deindustrialization, environmental decay, outsourcing, industrial incompetence, poverty and addiction to a permanent war economy are based on the design and organization of economic institutions. Economic reconstruction builds on the ideas of various institutional economists and thinkers whose work both critiques existing economic institutions and suggests modes of organizing society differently. Economic reconstruction, however, places much more emphasis on the idea of alternative plans and alternative organization.
Offsets are compensatory trade agreements, reciprocal trade agreements, between an exporting foreign company, or possibly a government acting as intermediary, and an importing entity. Offset agreements often involve trade in military goods and services and are alternatively called: industrial compensations, industrial cooperation, offsets, industrial and regional benefits, balances, juste retour or equilibrium, to define mechanisms more complex than counter-trade. Counter-trade can also be considered one of the many forms of defense offset, to compensate a purchasing country. The incentive for the exporter results from the conditioning of the core transaction to the acceptance of the offset obligation.
German rearmament was a policy and practice of rearmament carried out by Germany from 1918 to 1939, in violation of the Treaty of Versailles which required German disarmament after WWI to prevent it from starting another war. It began on a small, secret, and informal basis shortly after the treaty was signed, but was openly and massively expanded after the Nazi Party came to power in 1933.
The effects of the Cold War on nation-states were numerous both economically and socially until its subsequent century. For example, in Russia, military spending was cut dramatically after 1991, which caused a decline from the Soviet Union's military-industrial sector. Such a dismantling left millions of employees throughout the former Soviet Union unemployed, which affected Russia's economy and military.
Lloyd Jeff Dumas is a Professor of Political Economy, Economics, and Public Policy in the School of Economic, Political and Policy Sciences at the University of Texas at Dallas.
In political science, political economics, and peace and conflict studies, referring to the military–industrial complex, the peace–industrial complex defines the industry and economy derived from development, peacemaking, peacebuilding, and conflict resolution at both the domestic and foreign levels. While some scholars argue that the peace–industrial complex must oppose the military-industrial complex, others argue it is destined to become its natural, peaceful evolution, and further call it the "military-industrial complex 2.0". The latter argue the peace-industrial complex more precisely consists of turning military research and development into civilian technology as systematically as possible. Although it has been discussed in more recent times the concept was introduced as early as in 1969 by the U.S. Senate Committee on Government Operations.
The economics of defense or defense economics is a subfield of economics, an application of the economic theory to the issues of military defense. It is a relatively new field. An early specialized work in the field is the RAND Corporation report The Economics of Defense in the Nuclear Age by Charles J. Hitch and Roland McKean . It is an economic field that studies the management of government budget and its expenditure during mainly war times, but also during peace times, and its consequences on economic growth. It thus uses macroeconomic and microeconomic tools such as game theory, comparative statistics, growth theory and econometrics. It has strong ties to other subfields of economics such as public finance, economics of industrial organization, international economics, labour economics and growth economics.
The disarmament of Germany after World War I was decided upon by Allied leadership at the Paris Peace Conference. It was viewed, at the time, as a way to prevent further conflict with Germany and as punishment for Germany's role in World War I. The reduction of Germany's significant manufacturing capacity was one of the goals.