INTRODUCTORY STATEMENT By Senator Abraham Ribicoff, Chairman, Subcommittee on Executive Reorganization and Government Research The National Economic Conversion Act, S. 1285, introduced by Senator George McGovern on March 4, 1969, and referred to this subcommittee, seeks to establish an independent commission within the executive branch. Its purpose is to find ways to convert industries from defense-aerospace production and research to civilian projects; and thus avoid a major economic crisis in the event of a substantial cutback in defense spending, such as would be possible after the Vietnam war or a strategic arms limitation agreement. After gathering data and material on conversion from various Federal sources, the subcommittee decided to write to representatives of those institutions outside the Federal Government most directly concerned with the conversion issue. Last summer we wrote to the heads of 118 major industries, the mayors of 18 major cities, and the leaders of seven labor unions. In the letters questions were asked on the issues raised by the proposed National Economic Conversion Commission. The recent success of the manned moon landing has also focused attention on the possibility of employing the ingenuity and resources of private industry, both defense and commercial, toward a similarly dramatic accomplishment in meeting public needs. Two broad aspects of the conversion question were important-the economic consequenses of a cutback in defense spending, and the extent to which industries have been trying to apply the technology and knowhow developed through their work on defense contracts, or the capital and management abilities acquired through commercial enterprises, to pressing domestic problems such as housing, pollution, and mass transit. In response to inquiries, replies were received from a little over half of those contacted-69 industries, five mayors, and two labor unions. In essence, they confirmed the belief that the chances of a multibillion dollar peace dividend after the Vietnam war are small unless the Federal Government takes action on conversion. The businesses covered the whole spectrum of American industry. Selected from Fortune magazine's ratings of the largest companies in the country, they included aircraft, steel, management, and food industries. Most of them have heavy defense commitments and all are part of the interlocking defense oriented economy. In general, the responses indicated that private industry is not interested in initiating any major attempts at meeting critical public needs. Most industries have no plans or projects designed to apply their resources to civilian problems. Furthermore, they indicated an unwillingness to initiate such actions without a firm commitment from the Government that their efforts will quickly reap the financial rewards to which they are accustomed. Otherwise, they appear eager to pursue greater defense contracts or stick to proven commercial products within the private sector. "No business firm or industrial complex in this area," W. H. Nichols, mayor of Denver, wrote, "to the best of my knowledge, has made any specific breakthrough in any significant field of benefit to the city." Most of the responses indicated that Mr. Nichols' experience is probably not a unique one. Russell De Young, chairman of the board of Goodyear Tire & Rubber Co. implied that there was currently no need for his firm to enter the civilian public market beyond the sale of a few "spinoffs" from its defense work. "Markets owe their existence to demand," he wrote, "and demand is itself generated by needs." The need of the poor or of the environment, he characterized as "socially desirable goals" which the Government may encourage "from time to time." In addition, companies like Coca-Cola, Borden, and Procter & Gamble, which are basically nondefense enterprises, declined to comment fully on the inquiry. Claiming that their involvement in defense and space work was relatively small and unspecialized, they said they felt that the conversion issue was not one of their major concerns. For example, Mr. Harry O. Bercher of International Harvester Co. wrote that "because we do not anticipate any spinoff or conversion of International Harvester facilities, we feel we can add little to a discussion of the issues raised by this proposed legislation." Many other nondefense companies echoed Mr. Bercher's sentiments. Most companies with heavy defense commitments cited several difficulties which have hampered their attempts to contribute to the solution of domestic problems or to diminish their defense dependence by expanding into other sectors of the economy. The technology gap between defense-aerospace needs and civilian needs, as well as the differences in the kind of market to be served, were most often cited as major obstacles. Despite such obstacles, however, a few defense companies have been successful in converting to nondefense business. "Having successfully converted from completely military to completely civilian projects in 4 years," wrote Dr. Clark Abt, president of Abt Associates Inc., "we believe we could show other organizations how to do the same." Abt Associates began as a $500,000 department in an aerospace company in 1965 and has grown to become a $5 million firm utilizing systems techniques and the social sciences for a broad range of private and public civilian problems. While the responses of Abt Associates and a few other companies are encouraging and give some grounds for optimism, in general, the responses indicate that private industry is not interested in initiating any major attempts at meeting critical public needs. After carefully examining the letters as a whole, we found that the need for serious thought and action on conversion has largely been disregarded by most of the business community. And today, we are already beginning to pay the price of this disregard, as substantial defense cuts have presented our country with a severe economic problem. Within the last several months, amidst reports of inflation, unemployment, and tight money, we have been reading of a different kind of economic ill, directly related to recent cuts in defense production-localized depression. In certain metropolitan and regional areas across the Nation unemployment is high and growing, and industrial production has slackened and is due to fall off even further. In most cases, localized depression has been caused by large drops in defense production and employment, affecting the major plants which serve as the backbone of an area's economy. In Seattle, Wash., Boeing Co. layoffs have pushed the unemployment rate to close to 10 percent. In Wichita, Kans., home of aircraft plants of four major defenseaerospace companies, the unemployment rate is now at 7.4 percentthe city's worst in over 20 years. In the Bridgeport-Stratford area of Connecticut, an end to Vietnam fighting is expected to cause a loss of some 20,000 jobs, bringing unemployment there to the high levels of 1958. Overall, a recent Department of Labor report indicated that while ordnance and aircraft industries make up only about one-twentieth of all manufacturing employment, they have accounted for about a quarter of the recent decline in factory jobs. It also points out that layoffs in the defense industry make up the lion's share of unemployment among professional and technical personnel, which is at its highest rate since 1963. Most indications are that defense industry layoffs and production cuts will continue. In the past year, military cutbacks have resulted in the loss of some 370,000 defense industry jobs, but the outlook for the next 12 months is for an additional loss of some 590,000 men. Combined with the projected return of servicemen from overseas, this is virtually a million jobs lost within the Defense Establishment over a 2-year period. Another million could be lost indirectly, by cuts in defense outlays in retail and service fields. As a result of so many cutbacks, the demand for skilled defense workers is at its lowest in years. Well trained, highly skilled individuals have gone from company layoff payments, to unemployment compensation, to the welfare rolls. An aerospace engineer, father of five, has fallen from a $1,100 a month salary in California to a $239 a month welfare check. Another man, from Louisville, who held a $150 a week job in a munitions factory must now line up every month for his $140 welfare check. Eventually, the manpower released by current cutbacks in the defense industry may be reemployed as our economy continues to grow. But in the meantime, individuals and companies are suffering. And our environment and the cities are suffering also, as the talents and know-how that could be utilized to attack these problems lay idle. Certainly there are important obstacles to industrial entry into commercial and nondefense Government fields, and most defense companies are well aware of these. Multiple political jurisdictions, unclear markets, union practices, and public resistance to innovation are some of the most restrictive. But to retreat from entering virtually all the territory in the civilian field on the basis of these obstacles, and to defer to the Government to overcome them, conflicts with the best traditions of the free enterprise system. Companies already engaged in primarily commercial enterprises, though they have extensive capital and well-developed marketing capabilities, seem reluctant to go beyond the possibilities of their own products. In the light of the lack of initiative on the part of private industry to develop its own products and programs in the realm of civilian problems, what is needed is a strong Federal role in conversion and in the use of industry resources for public problems. Not only could such a role prove beneficial to our cities and the environment, it would also provide companies with a profitable alternative to layoffs in the event of a major defense spending cutback. Such a cutback may become possible with either an end to the Vietnam war or a strategic arms limitation agreement with the Soviet Union. Without a strong Federal role in conversion, the consequences of the current relatively minor cutback in defense spending, combined with the overall lack of initiative on the part of our Nation's industries, can mean that an end to the hostilities in Vietnam may bring either a huge rise in the development and production of supersophisticated, overdesigned and unnecessary military hardware, or else a real depression, concentrated in the geographic areas currently most dependent on defense production. The views of former Lt. Gen. James M. Gavin, who is now chairman of the board of Arthur D. Little, Inc., as he explained them in his letter, contain the essence of what is now required in terms of national spending priorities. He wrote that because of our capability of “delivering a tactical weapon from any point on the globe to any other point" and of "keeping any point on the globe under surveillance" he was convinced that: Strategy today begins with the strength of our domestic The irony is that without an increased Federal role in conversion, we may reach the point where our superweapons symbolically turn against us, destroying what they are designed to protect. 91ST CONGRESS 1ST SESSION S. 1285 IN THE SENATE OF THE UNITED STATES MARCH 4, 1969 Mr. McGOVERN (for himself, Mr. BAYн, Mr. BROOKE, Mr. BURDICK, Mr. Cook, Mr. COOPER, Mr. CRANSTON, Mr. EAGLETON, Mr. GOODELL, Mr. HART, Mr. HARTKE, Mr. HATFIELD, Mr. HUGHES, Mr. INOUYE, Mr. JAVITS, Mr. KENNEDY, Mr. MCINTYRE, Mr. MATHIAS, Mr. METCALF, Mr. MONTOYA, Mr. Moss, Mr. MUSKIE, Mr. NELSON, Mr. RANDOLPH, Mr. RIBICOFF, Mr. SCHWEIKER, Mr. Scorт, Mr. STEVENS, Mr. TYDINGS, Mr. WILLIAMS of New Jersey, Mr. YARBOROUGH, and Mr. YOUNG of Ohio) introduced the following bill; which was read twice and referred to the Committee on Government Operations A BILL To establish a National Economic Conversion Commission, and 1 for other purposes. Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That this Act may be cited as the "National Economic Con4 version Act." 6 SEC. 2. The Congress finds and declares that the United 7 States has during the past two decades made heavy economic, 8 scientific, and technical commitments for defense; that care |