Presented October 10, 1986 - No. 4059

ABSTRACT: The identification of the procedures and the places for the realisation of the industrial conversion of companies producing goods and services for military uses. The formation of a specific commission and the financial coverage for the provision by means of the taxation of the war industries.

(ACTS OF PARLIAMENT - CHAMBER OF DEPUTIES - No.4059)

Honourable deputies! - The legislative initiative and the consequent government action concerning the industrial conversion of companies that produce goods and services for military uses cannot and ought not, in the opinion of the signers of this bill, to regard the general or partial programming of the transformation of the production of the war industries to civilian uses.

Such questions should be faced and resolved by those who define security policies and decide on the allocation of national resources. The purpose of this bill is to define the procedures and the places in which, once the necessary political decisions have been adopted, it will be possible to realise a programme of industrial conversion (or else, to favour the conditions that will enable a programme of this kind to take place). In fact, to blindly undertake, without a rigorous programme, a conversion process of the industries in the military sector would cause political, economic, productive and employment instability: it would be an impossible undertaking.

* * *

Article 1 of the present bill foresees the creation of a Commission for Industrial Conversion within the Prime Minister's office of the Cabinet that will constitute the central point of reference for conversion activities with regard to both the organisation of the cognitive data concerning the productive structure military uses, as well as the working out of programmes for conversion. Article 2 establishes that the Commission shall prepare an orientation programme for industrial conversion as a practical guide - beginning with a macro-economic analysis of the production and market situation - to organise the re-training on the various levels of those working in the war industry; the conversion of plants; the solution of normative and contractual problems.

A census of all the companies and their characteristics will be particularly important. It is well known, in fact, that the almost insurmountable obstacle, not only for a possible conversion, but for a mere analysis of the real situation of the war industries today, is the lack of cognitive data.

Article 3 identifies the sectors towards which the conversion should be directed and the range of collaboration between the commission and the local committees for determining the alternative uses. These latter - under the guidance of Article 4 - are responsible, among other things, for working out the plans for the partial or total conversion of the enterprises operating in the provinces under their jurisdiction; detailed plans "concerning the alternative use and the restructuring of existing plants and technology as well as the new orientation and education of the personnel in function of the proposed new uses", it being evident that each situation with its peculiar characteristics demands specific initiatives. The committee also functions as the local observer for the collection of data - to be up-dated every six months - relating to the proprietary control, to sales, to personnel, to production, and to research and development activities.

Article 5 establishes a solidarity fund in favour of employees of enterprises interested in converting, who can make use of a range of tutelary public interventions with which are also associated employees who "for imperative reasons of conscience" do not intend to continue in their collaboration with enterprises working in the military sector.

A fund for economic readjustment, capable of offering easy-term loans and contributions to enterprises that have prepared a plan of partial or total conversion, is established by Article 6. Maintaining occupational levels and the effective realisation of the plan are indispensable requisites for being able to draw on this fund.

The financial coverage of the provision is guaranteed, according to Article 7, by a tax increase on arms production and through the companies in the military sector contributing 1% of their total annual sales. These proceeds are to be divided among the various categories established in the bill.

* * *

A discussion has begun about the direct costs of military expenditures: the funds assigned to Defense and from there in part to the enterprises producing arms systems.

The economic studies on conversion emphasise another kind of cost. That would be the cost-opportunity of the civilian goods and services which are lost to the collectivity when resources are destined for military production. This is a generally valid principle for the evaluation of any kind of economic policy action, just as it is for the consequences of these in terms of reallocating resources.

Here, however, it interests us because of the particular goods being produced. The American economist, Seymour Melman, writes in regard to this: "A modern reaction bomber, a supersonic fighter, a submarine or a nuclear missile are exceptional technological productions. Nevertheless whatever purpose they may serve, they do not contribute anything at all to ordinary consumption and thus they do not have any effect on the cost of living. Nor can they be utilised for further production. In fact, however complex a nuclear powered submarine may be, no one can do anything useful with it".

According to another American expert of military economy, Hugh Mosley, there are three common uses of the concept of cost-opportunity: one kind of cost-opportunity relative to the public budget (in terms, that is, of the political allocation of government resources), one in terms of real economic resources, and one for performance, so to speak (in terms of economic development which must be forsworn). The third use of the concept is clearly the most complex, requiring an analysis of military expenditures in relationship to the general characteristics of the economy of a country. The purpose would be to measure the impact on its growth, competitiveness, employment, inflation, and so on.

The fundamental uselessness of the goods produced by the war industry, according to Melman, involves another type of cost to society: the increase of the marginal productivity of capital (in essence, the efficiency increase in the employment of this productive factor) is used in the military sector for objectives that cannot lead to new production and therefore it is lost forever. The same is true of financial and human resources used in military research and development which lead to a know-how applicable only in the military sector itself. Robert De Grasse, another American economist, notes in this regard how military research deprives the civilian sector of engineers and scientists. This appears particularly serious when, as now, resources are scarce in the field of advanced technology.

With regard to the question of technological fall-out in the civilian field, it is worth repeating the opinion of the Nobel Prize winner for economy, Wassily Leontief: "Although some researchers maintain that the civilian economy receives secondary benefits from military training and infrastructures in the less developed countries, and from research and development in the industrialised countries, and that these benefits compensate for the negative effects of the military burden, one could also affirm that the same benefits would be obtained from a well-financed programme for the exploration of space or the construction of a large-scale railroad network, or the construction of... modern pyramids".

Another aspect which the studies on conversion emphasise is the inefficient management typical of companies producing for defense. In general they do not follow the criteria of minimising costs which characterises a market economy. On the contrary: they maximise the costs and compensate for that by raising prices (or subsidies). The managers of the war industries know, in fact, that once they have won a contract from the Defense Ministry, prices can inflate thanks to the invisible yeast of so-called military inflation. All of this leads them to make a habit of inefficiency. And that becomes evident in the undependability of the military product. In the civilian sector one notes the trend towards an increasing life of the guarantee of a product, which marks the growing dependability of the product. An opposite logic seems to prevail in the military sector. Melman notes how for every one hundred F-15's (the jewel of American aeronautic technology) in service, 45 are at the same time grounded for maintena

nce. As a consequence of this lack of interest in the dependability of the product, the work force too gets used to inefficiency in production.

* * *

The structural conditions of the Italian war industry - usually described and analysed in a tortuous way, given the lack of certain cognitive data - are such as to make conversion to civilian purposes practicable.

Its present situation is, in fact, substantial but not of major proportions: according to the estimates of the IRDISP (2), the war industries counts 1.6% of employment, 2.1% of production, and 2.3% of national industrial exports. These are figures that make one think, above all if one connects them to the debate opened in the columns of the Bulletin of the Atomic Scientists in the first six months of 1986: a sharp conflict between the organisers and the theoreticians of the national and local campaign for economic conversion (Lloyd J. Dumas, Suzanne Gordon, Kevin Bean) and the director of the Defence Budget Project in Washington, Gordon Adams who stubbornly contested - although often erroneously and imprecisely - the results of all the attempts at conversion put into practice in the Western world after the second world war. In the said debate, however, there clearly emerges the crushing imbalance between the real forces in favour of the interests coalesced in the U.S. military-industrial complex with r

espect to those put into the field by the pacifist organisations and by several local communities and restricted sectors of opinion.

The Italian military-industrial complex, which has grown greatly economically and in political awareness, is still, however, a recent experience characterised by a lack of scruples in exporting to the Middle East, to "hot" areas, and to dirty markets. This is an experience whose great strength is found in the massive, incomparable capacity to distribute large profits through intermediaries. As documented by the government itself, in its heyday - relative to which we have official figures - the earnings of middlemen (or pay-offs) alone, in the three-year period of 1981-83, amounted to 471 billion lire. These figures show the dimensions of what is probably the greatest obstacle to be overcome by those who want to effect a vast conversion programme.

The growing availability of public funds for the acquisition of military equipment and the slow transferring of the area of action from the Third World to that of inter-occidental cooperation determines and will accompany crises in the Italian armaments industry, but they are crises that will be "slowed-down" by the fact that the enterprises are to a large degree public ones. However, experience shows that the capacity for programming is not a special characteristic of this sector.

For our purposes, the new tendencies are such as not to prefigure a new boom and, on the contrary, permit of conditions for a policy of conversion in the sector or of even greater breadth.

In fact, it is well-known that the international situation has created great difficulties for our traditional export policies, a policy that had guaranteed the absorption of about 60% of sales (today it has gone down to 50%) and made Italy the world's fourth greatest exporter (today in sixth place, with the Chinese People's Republic hot on its tail).

Contributing particularly to this has been the serious economic crisis of the developing countries (to which a total of 90% of our exports have been directed); the drastic diminution of available financing of the OPEC countries, great purchasers of Italian arms in the last decade; the growing competition of newly industrialised countries in Third World markets; the increasing difficulty in regard to Italian public opinion of unscrupulous or illegal methods caused by the outbreak of dramatic political or moral contradictions (one need only think of the large arms exports to South Africa or war theatres such as Iran-Iraq), but also regarding our security (for example, the Libyan affair and the direct threats made on Italy by the North African state which is the prime beneficiary of Italian arms exports).

The decline of a political phase which can well be summed up in the Beirut operations of Col. Giovannone, the true ambassador and permanent middle-man for multiple relations and interests, thus involves precise consequences for the export of Italian arms, although it does not cancel its murky vocation and traits. A beginning for their suppression will be made with the bill under study in the Chamber for the regulation of the arms traffic which only appears designed to introduce gradual mechanisms for giving operators in the field more publicity and partial responsibility.

With regard to the remaining 50% of Italian arms production, destined for our armed forces, we refer those interested to the acute analysis made in the IRDISP volume on Italy and the arms race, "A Counter-White Paper of Defence", Rome 1986; nor will the consideration appear illegitimate because of being over-simplified according to which military doctrine in Italy has often been decided on the basis of the availability of a certain type of arms system; only rarely has an arms system been acquired on the basis of a doctrine and strategy adequate for the defense of the country.

And finally, in our country we are dealing with and arms industry that is not yet a key sector, that is largely controlled by the government, and that is going through a deep transformation which will necessarily involve a rationalising of behaviours and structures with respect to which the public's ideas about the possible alternative civilian uses and those of the most motivated workers in the field are immature.

This is the reason why it is most important that the Parliament adopt legislation capable of giving a new direction, knowledgeable and responsible, to the industrial activities presently engaged in production for military uses.

The lack of knowledge and analyses on the practicability of economic conversion has many causes which can only be obviated by the creation of government studies and programmes.

* * *

Very important in connection with the claims of those who magnify the "fall-out" in civilian sectors from the investments made in the military sector is the following remark by Carlo Rubbia: "You can even give me 26 billion dollars - the initial funds allocated for SDI (1) research - and I will show you what a nice scientific and technological fall-out for civilian uses one can get without working in the military field...".

Furthermore it is well known what a singular and very successful turn the Japanese production apparatus took after the war, favoured if not precisely caused by research and development funds for military uses amounting to between 1.1 and 2% of all the money spent on R/D. In this regard the American economist Lloyd Dumas observed: "The military sphere is marked by sales to a single buyer (the government), very strong pressure on the capacity of the products' maximum yield and relatively little attention to costs. The civilian sphere, viceversa, is marked by many buyers in the market, by attention to the goods produced but not to their capacity for maximum yield, and to very great attention to minimising costs".

Unquestionably, the recent developments in the production of armaments (effectively described by the expression "bombastic arsenals" coined by Mary Kaldor) demonstrate such an extreme emphasis on sophistication and thus on the specificity of R/D and military production as to make the civilian fall-out very modest so that we are obliged to take a good look at the ever more astronomical costs; there is also very fast obsolescence in the more modern arms systems (and the moment is imminent when the Emerging Technologies, above all the space ones, will create a crisis in the traditional battled platforms themselves: ships, tanks, airplanes).

However, we can reply to our critics that, in the face of political choice that intends to actuate conversion to civilian uses, those companies whose civilian fall-out has been magnified

will know well how to demonstrate this quality of theirs in the moment in which the international situation or an internal initiative which is finally rational and not subservient to the logic of the arms race, will push in the direction of partial or even general conversion. Irony aside, the Western industrial sphere has known - for example, in the violent post-war reconversion phase - much more complex and delicate moments than the one which Italy will have to confront to restructure a sector that employs 80,000 people.

In our opinion an excellent terrain for experimentation and action is offered by the policy of cooperation for development and the fight against hunger, malnutrition and disease in the Third and Fourth Worlds. In this field we have at our disposal definite public funds amounting to the equivalent of the annual quota reserved for spending on military goods and services - and this is destined to grow - so that it is, in fact, possible to programme a rationalising of Italian involvement by means of the production of small and medium plants for sources of renewable energy, agricultural and irrigation technologies, storage structures, construction, mechanical vehicles, health units, communications equipment, and disaster aid equipment. Vast productive sectors can be involved in accordance with the Armed Forces' administrational and operational structures in a framework of action and political presence of great and direct relevance for the country's security, peace and foreign policy.

* * *

Esteemed Deputies! The promoters believe that only a careful and deep knowledge of the present situation and the alternative possibilities will allow us to adopt a new policy for the companies that today operate in the military sector. To this purpose they hope that the present bill can be the start of a confrontation throughout the country and among the political, economic and social forces for the finding of a concrete response in Parliament.

The signers, in fact, have considered that in this they have made an exception to the behaviour adopted by the Radical Parliamentary Group during the present legislature which foresees not presenting legislative initiatives except in cases where the respecting of the regulations is previously and politically assured with regard to time limits for studying and voting on the proposals. This is because of the announcement of support for the present proposal from the ACLI [Associazioni Cristiane dei Lavoratori Italiani, or Italian Christian Workers Associations, ed.], the Movimento Nonviolento, the Mani Tese [Extended Hands, ed.] and from numerous committees of conscientious objectors, from Missione Oggi [Today's Mission, ed.], Pace e Sviluppo [Peace and Development, ed.], from "green" [i.e. ecological, ed.] councillors and representatives, and from Movimento Cristiano per la Pace.

The task of the promoters will be immediately to get signatures on the bill from representatives of other parliamentary groups.

LEGISLATIVE BILL

Art. 1

1) Attached to the office of the Prime Minister there is to be established the Commission for Industrial Conversion with the aim of creating a permanent observer over national military production and to prepare plans for industrial conversion to civilian uses of companies that produce goods and services for military uses.

2) The Commission is composed of one representative each for Ministries of Defence, Industry, Commerce and Crafts, Labour and Social Security, for Coordination of Initiatives for Scientific Research and Technology, of the Treasury, of State-Owned Companies, and of three representatives of the labour unions, three representatives of company organisations, three experts to be named by the Prime Minister, and three experts to be nominated by agreement among the President of the Republic and the Speakers of the Senate and of the Chamber of Deputies.

3) The Commission elects its own president.

4) The Prime Minister, by his own decree, nominates the Secretary of the Commission and determines the composition and salaries of the personnel, who however are not to number fewer than seven, and the employment of consultants, also on a temporary basis, who are not to number more than seven, as well as the salaries to be paid to the members of the Commission.

Art. 2

1) The Commission for Industrial Conversion prepares the orientation programmes for industrial conversion.

2) The programme will be drawn up within eighteen months of the date in which the present law goes into effect and will be annually up-dated.

3) The programme is based on a macroeconomic analysis of the production realities of the national and international markets. It illustrates the guide-lines of the practical methods for the conversion from military to civilian production with particular reference: to the re-training and the re-organisation of managers, technicians, administrators and production personnel; to the conversion of plants; to questions regarding regulations and contracts; to the implications for other, connected production sectors as well as to the communities and areas involved.

4) Connected to the programme, and annually up-dated, is an analytic census of the companies that produce goods and services for military use, with information regarding proprietary control, sales and the principal economic indicators, number of employees and their professional qualifications,, of the materials being produced, of those produced in the past as well as of the research and development activity presently under way.

5) The programme will be sent to the Local Committees For Alternative Uses (see Art. 4) as well as to the competent Commissions of the Chamber of Deputies and the Senate of the Republic.

Art. 3

1) The Commission For Industrial Conversion draws up programmes for the conversion of production in the military sector to that of the civilian sector with particular emphasis on mature technologies in the fields of electronics, informatics, space, aeronautics, energy, agriculture, communications, construction, health, transport, civil prevention and protection, environmental safeguards and with particular reference to the needs and objectives of the fight against hunger and malnutrition and cooperation with developing countries.

2) The Commission collaborates with local Committees For Alternative Uses discussed in Art.4 for the purpose of working out concrete solutions in the plans for production and employment with regard to the partial or total conversion of sectors involved in military production.

3) The Commission studies and works out projects for the re-employment of civilian and military personnel in the framework of the defence administration's programmes and ideas for restructuring.

Art. 4

1) The Committees For Alternative Uses are constituted on the provincial level in the provinces where goods and services are being produced for military uses in companies employing a total of at least one hundred people.

2) On the basis of up-to-date analyses of the production, economic and employment situation, the Committees work out plans for partial or total conversion to civilian uses of companies operating in the province concerned according to the indications in Art. 3.

3) The plans must contain detailed projects concerning the alternative uses and the re-structuring of the existing plants and technologies as well as the re-orienting and re-training of the personnel in function of the proposed alternative uses.

4) The Committees are composed of seven members nominated by the Prime Minister by decree of which three are to be experts designated by the presidents of the provincial councils in agreement with the mayors of the communities in whose territories the companies are located, two are to be union representatives and two representatives of the companies designated by their territorial associations.

5) The Committees provide for a semi-annual up-dating of the analyses of the local productive structures with particular reference to proprietary control, to sales, to the personnel in their respective professional categories, to the materials being produced, and to the research and development activities.

6) This analytic documentation is to be sent to the Commission for Industrial Conversion attached to the Prime Minister's office.

7) The Committees can have recourse to consultants who must not number more than three and have personnel at their disposal who do not number more than three in accordance with the fourteenth and fifteenth paragraphs of Article 3 bis of the Law of June 1, 1977, No.285 and its subsequent modifications and additions.

Art.5

1) Attached to the Ministry of Industry, Commerce and Crafts, there will be instituted a solidarity fund for employees working in the military sector who are interested in a process of industrial conversion. The fund is independently managed and administrated outside the budget according to Article 9 of the Law of November 25, 1971, No.1041 and is organised by a decree of the Prime Minister in accordance with the Ministry of Industry, Commerce and Crafts, the Ministry of Labour and the Ministry of Social Security.

2) Services from the fund will be available to workers, office workers, technicians, and employees of companies in the military sector who have been employed there at least six months before the present law goes into effect and who for imperative reasons of conscience declare at the competent provincial office of labour and full employment that they do not want to continue participating in the activities of the said companies.

3) The subjects referred to in paragraph 2 have a right to unemployment compensation as in the Law of August 12, 1977, No.675 for a period of not more than eighteen months.

4) The payment of unemployment compensation will cease when they begin new employment.

5) During the period in which they are receiving unemployment compensation, the workers referred to in the present article will be admitted, with priority over all other workers, to professional training and re-training courses according to the Law of December 21, 1978, No.845. In the case of unjustified refusal on the part of the worker the payment of unemployment compensation will be suspended.

6) During the same period, production and workers cooperatives, composed exclusively of the workers referred to in the present article, will be admitted to the benefits of Section II of the Law of February 27, 1985, No.49.

7) Still within the above-mentioned period, workers referred to in the present article who intend to pursue self-employed activities may, by decree of the Ministry of Industry, Commerce and Crafts and after hearing the opinion of the Fund referred to in paragraph 1, receive easy-term mortgages and contributions to the payment of interest for medium-term financing granted by credit institutions.

8) At the moment that the benefits referred to in Articles 6 and 7 are received, unemployment compensation ceases.

9) Once the period referred to in paragraph 3 is over, the workers still without employment have the right to receive half the compensation indicated in the above-mentioned paragraph for a period not to exceed twelve months, and they will be registered in the ordinary unemployment rolls with priority over all other workers in search of employment. Those who are accepted by companies working in the military sector and who refuse such employment for imperative reasons of conscience will automatically revert to their previous positions in the unemployment rolls.

Art.6

1) A Fund for Economic Conversion is constituted at the Ministry of Industry, Commerce and Crafts whose goal is to create incentives for converting the production of companies operating in the military sector.

2) The Fund is organised by a decree of the Prime Minister in agreement with the Ministry of Industry, Commerce and Crafts, the Ministry of Defence and the Ministry of Co-ordination of Scientific and Technological Research Initiatives. With the resources available to the Fund, within the framework of the instructions given in Article 3, the Commission for Industrial Conversion, in agreement with the Committees for Alternative Uses, can offer easy-term mortgages, contributions to the payment of interests for medium-term financing granted by credit institutions, and direct contributions to companies that have prepared a plan for partial or total conversion of their activities to civilian uses.

3) The amount of the payments will be graduated in function of the maintaining of employment levels foreseen in the plan. THe actual payments will be related to the progressive realisation of the plan itself.

Art.7

1) To cover the fiscal burden deriving from the present law, estimated at 800 billion lire per year for the years 1986, 1987, 1988, it is provided:

a) to increase respectively by 100% and 200% the taxes on government concessions numbers 25, number 1), 26, 31, and 34 and numbers 30, letter a) and b), 32, 33, and 35 of the tariffs  appended to the decree of the President of the Republic of October 26, 1972, No.641 and its subsequent supplements and modifications;

b) through a payment to the exchequer by the companies producing war materials of 1% of their annual sales.

2) The payments referred to in letter b) of paragraph 1 is to be regulated by a decree of the Prime Minister to be emanated within no more than thirty days from the time the present law takes effect.

3) The sums referred to in letters a) and b) of paragraph 1 are to be divided as follows:

a) ten per cent to the Commission for Industrial Conversion attached to the Prime Minister's office;

b) twenty per cent to the Committees for Alternative Uses by means of a proportional subdivision to be established by the Commission for Industrial Conversion;

c) thirty five per cent for the solidarity fund mentioned in Article 5;

d) the remaining thirty five per cent to the Fund for Economic Conversion mentioned in Article 6.

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TRANSLATOR'S NOTES

1) SDI - Strategic Defence Initiative

2) IRDISP - Institute of Disarmament Research