Prometheus 6

from James MacLean of Hobson's Choice

PART 2

Recently I wrote an oddly-structured essay that began with my extreme anxiety about current events, and turned immediately to the distantly related topic of US industrial management.

I think the problem is that the neoconservatives actually represent a tradition of industrial management from the USA. The "American System" of manufacturing emerged from the refining of petroleum and the production of machinery (which accounted for nearly all US exports from the late 19th century to the mid-20th); it involved firms that had a large, professional system of modular, bureaucratic management in distribution, development, and production. By the 1920's these industrial bureaucracies had replaced the old powerhouses of investment bankers.

Elsewhere, in an article on The Origins of Totalitarianism (Hannah Arendt), I wrote,

The professional staff of a large corporation are often far more zealous and hidebound in their bloodthirstiness than the top managers. Those warbloggers who chirp about murdering "traitors" who question the President's actions, are probably perfectly respectable members of the middle class whose bloodlust stems from their frustration at their mundane, insignificant role in an endeavor that fascinates them. They are anonymous, not out of cowardice, but because they hate the fact that they are nobodies. Nor is there any meaningful cleavage between them and the bourgeoisie (on the one hand) and the middle class (on the other) to which they technically belong.

Readers might find this bizarre in the extreme. Everyone knows the President's foreign policy is neoconservative, and neoconservativism stems from the philosophy of Leo Strauss. More confusing yet is my dragging in the concept of the "developmental state" [1], in which I attempt to demonstrate that attempts to guide development in the 3rd world have contributed mightily to the rise of neoconservativism. What could development policy and industrial management have to do with Israel's late invasion of Lebanon, or with proposals to invade Iran?

In order to answer this, it's necessary to start with a proposition: political policy is driven chiefly (but not exclusively) by business interest. Business interests have the following powerful attributes:

1. They clearly and effectively establish a community of interest among different people, typically people of extra skill, intelligence, drive, and focus;
2. They automatically identify, through trial and error or through markets, the overriding political interests of members;
3. They impose, in the same way, a highly reliable structure of "fairness" and "common sense" that the group uses to establish goals;
4. They are necessarily the entities used to dispose of social assets.
5. They are enduring.

Occasionally the term "professional" is applied to occupations that are usually thought of outside the realm of business; for example, "professionalism" is often used to describe the high degree of competence and self-discipline observed among Hezbollah guerillas in Lebanon.[2] Typically, responsible officials in business develop a high degree of understanding and realism about the milieu in which they work, as well as courage and sensitivity. However, as I will attempt to show, these attributes are frequently discouraged under different conditions.

Economically speaking, the distinguishing feature of US enterprise is the large competitive industrial firm. In comparison with other industrialized nations, mot notably the UK and France, American and German firms responded to their peculiar environments by creating replicas of the nation-state in the form of the industrial enterprise. In a few cases, such as the German shipbuilding industry or American railroads, this was the direct result of government initiative: the government took much of the early risks, then cooperated fully with the rapid transfer of assets to private hands at reduced rates. In other cases, it was the result of the unique conditions of the North American markets, which lacked a cadre of respected managerial houses, and hence relied on "upstarts" that could convince capital managers with a fait accompli, such as early success on a small scale; the need to secure financing from distant or foreign sources; and the anarchy of American cities, which required a powerful force to resist extortion by gangs or party machines.[3] In the rest of the industrialized world, save for Germany, businesses were nearly always run by families; financing likewise was supplied by closely-affiliated family-run merchant bankers, such as the British Barings or the French Paribas. In Germany, a rare national exception emerged: several large chemical and electrical machinery firms emerged and swiftly dominated European markets for finished goods.

For decades, government officials and business executives in Japan, Britain, and France wrung their hands at their own failure to consolidate operations in the face of US and German competition. The relatively congenial process of German industrial organization made it far less threatening than the (at times) murderous US environment, in which competitive methods included at times outright sabotage. While German laws sanctioned the formation of price agreements and cartels, American firms required the means to exploit victories against competition and against labor, or against recalcitrant governments. In all cases, American industries became dominated by those that had made initial investments in management, distribution, and production, in that order; while production or even distribution networks could, at a cost, be acquired, the paramount concern of an American enterprise was the ability to assimilate the management of captured productive tools. Only the Great Depression, and its concomitant populist backlash, prevented a final conquest of financial firms by their aggressive industrial clientele.

Long before WW2, the developed industrial economies were moving towards a process of imitation and regional specialization. In addition to national pride, there was a very concrete benefit to becoming a center of high-prestige production. Countries where high-cost, big-ticket industrial goods were produced had a natural advantage in securing high wages and managerial power over supplier firms, rather like the way in which the major auto producers in Michigan compelled their parts suppliers to absorb the risks of innovation... or lack thereof. Much of the War was driven by rivalry over that specialization, with the major powers of the USSR and the USA "winning" both in the sense of political hegemony and industrial ranking: the most prominent high-tech industries of Europe now were based in countries heretofore regarded as the periphery of the industrial world. Not until the 1970's was this outcome reversed.

(To be continued)

NOTES: 1 "Developmental State": briefly, a state whose primary focus is economic and industrial development; a society where either authoritarian rule or broad social consensus permits aggressive capital accumulation. In the 1970's and subsequently, the developmental state acquired prestige as the path that a 3rd world country could escape the cycle of capitalist underdevelopment. Earlier than this, certain actors in the US government and elsewhere became interested in stimulating "developmentalism" in Western-aligned states; perhaps the biggest potential targets of this were Indonesia and Brazil.

For an excellent introduction to the concept of the Developmental State, please see "The rise and fall (?) of the developmental state: The vicissitudes and implications of East Asian interventionism" (PDF) Mark Beeson. A very good critique of Chalmers Johnson's hypothesis is the book, Misunderstood Miracle, David Friedman [discussed here].

2. An example of Hezbollah professionalism is the emphasis on objectives over individual emotions: after Israeli forces withdrew from the security zone in 2000, for example, Hezbollah was free to carry out reprisals against members of the defeated Army of South Lebanon (SLA); to its credit, it refrained from doing so.

The South Lebanese Army (SLA) was Lebanese militia that sided with the Israeli Army during its invasion and occupation of Lebanon (1982-2000). By 1989 it was entirely dependent on Israeli supplies, weapons, and air support. In 1985, the SLA opened a detention center at Khiam, where they kept prisoners under barbaric conditions. The main enemy of the SLA was, naturally, Hezbollah, and many of the people detained were tortured because they were associated with Hezbollah in some way.

After the Israeli withdrawal, the SLA's top members fled to Israel. Others, however, were unable or unwilling to flee; surprisingly, these were treated leniently, and a large number of SLA members actually returned to LebanonSLA members who had supplied it with intelligence during the war. voluntarily. Indeed, Hezbollah actually intervened to protect

3. Sources for this include: Scale and Scope: the Dynamics of Industrial Capitalism, Alfred D. Chandler (1990); studies on the development of industrial enterprise in other countries, especially those of the European Corporate Governance Institute and the annual Business and Economic History Conference. There are a large number of histories of banking available, which are useful for understanding the underpinnings of business financing in the regions they describe.