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The essence and the content of conversion of military production
Material posted: -Publication date: 27-11-2011

More than forty-five the arms race between the USSR and the USA made a solution for the demilitarization of the production more difficult, but not hopeless. In this context, becomes actual the problem of determining the nature and content of conversion of military production, the right way and develop approaches to the implementation of the "peaceful" conversion of military production in the interests of national economy of each state.

Conversion (from the Latin word convercio - change, transformation) of the military industry[1] is the process of conversion, changing patterns of military production organizational, technical, technological, professional and economic nature. The nature of conversion of military production involves the reorientation of military industry, research laboratories, educational institutions, military bases and other facilities from military to civilian use, carried out in accordance with a political decision, while reducing military spending and orders.

Reference. Restructuring is the process of inverse transition, return production is temporarily switched to the military use, to remain "civil" use. The process of reconversion was carried out, for example, in American industry after the second world war, when the former "civil" companies, transformed (have undergone conversion) during the war for wartime production, and newly translated (they were restructuring) on the production of civilian products, as a rule, the same as they did before the conversion. Restructuring the military industry, thus, can be represented as a special case of conversion.

Conversion of military production should be seen primarily as a socio-economic processaffecting the functioning of the entire economic complex of the country. Despite the undeniable fact that high levels of military expenditure, and, consequently, of military production causes huge damage to the economy, diverting all kinds of resources (material, human, commodity, financial, energy, etc.), a sharp reduction in these costs, the precipitous demilitarization of the national economy and conversion of military production may lead to serious negative socio-economic consequences. Won't just be workers who lose their jobs in the military industry; a decline in the level of income can lead to reduction in consumer spending that, in turn, may cause a cumulative decline in employment in industries producing consumer goods.

Similarly, the reduction in the procurement of production equipment of military-industrial enterprises deprived of military orders, may cause a reduction of production and dismissal of a considerable part of workers in enterprises producing means of production.

In this regard, the conversion of military production has its economic, social, technical and military aspects.

Consideration of the economic aspect of conversion is largely due to changes in the structure and volume of both military and "civilian" production, entailing "changes" in the supply and demand of different types of products and resources in various sectors of the national economy.

The social aspect of conversion of military production is usually considered in connection with the changing demand for qualified labour resources and labour force in the sectors of military production.

The technical aspect of conversion leads to the consideration of possible changes in technology enterprises and industries of military production, associated with their conversion for the production of "civil" purposes.

And, finally, consideration of the military aspects usually associated with the inevitable changes in the economic defence of the country, due to the reduction of military production.

Consideration of conversion of military production from this perspective involves the description of its basic forms. The main forms of conversion of military production are:

  • restructuring of the military-economic complex, consisting in the decrease of production of military products; thus the main ways of restructuring is the complete or partial reduction of military production, as well as the reservation of production capacities of enterprises producing military products;
  • diversification of military production, which consists in the conversion of production facilities of enterprises and industries of the military-economic complex on the production of "civil" purposes; the main ways diversification is the complete or partial transition of companies previously producing military products, to production of civilian products, as well as cooperation in the use of production capacities of enterprises producing military products, with enterprises in "civil" sectors of the national economy;
  • assimilation of military production, which consists in the development of enterprises and industries of the military-economic complex of production, which has its "civilian" applications; the most significant ways of assimilation is the complete or partial assimilation of military products to civilian occupations, and assimilation of production capacities of enterprises producing military products, in the technology of production of civilian products (development of dual-use technologies).

Conversion of military production captures all aspects of the economic life of the state. She works primarily on the core production activity of the enterprises of the military sector of the national economy, retraining of staff, conversion of production facilities, the restructuring of the economic mechanism, etc.

In this regard, when determining the content of conversion of military production it is advisable to consider:

  • the conversion of the main production activity of enterprises of the military sector of the economy,
  • conversion training
  • the conversion of production facilities, as well as
  • the conversion of the economic mechanism.

Conversion of the main production activity of enterprises of the military sector of the economy is the changing patterns produced by an enterprise and includes determining the volume and timing of development of new civilian products.

After the second world war most of the military-industrial firms in the U.S. under the influence of fluctuations in the demand for weapons, especially after the American intervention in Korea and Vietnam, significantly increased the weight of their "civilian" products, constantly expanding its product range. This process of so-called diversification of production began to play a positive role in conducting the conversion of military production, because it reduced the dependence of companies from military orders, increased their willingness to complete the transition to the production of goods for "civil" purposes. (See ADJ.)

Conversion training is to upgrade human capacity, concentrated in military applications and involves the determination of the number of workers released from execution of military orders, their preparation for use in the production of goods "for civil purposes".Conversion training may include, on the one hand, professional retraining of personnel of enterprises converted, and, with another - the reorientation of the whole system of training for staffing the production of civilian products.

Professional retraining in the course of conversion of military production involves the training of personnel in accordance with the change in the structure of the product range and represents a serious problem for the staff of the converted enterprises. This especially applies to managerial and engineering and technical personnel, since these categories of specialists professional training is accompanied by a change of the style of work associated with the need to find solutions, maximally taking into account the needs of mass consumers.

The reorientation of the system of vocational training involves training for "civilian" sectors in the required quantity and quality (qualifications) in accordance with installed in the new conversion ratio between military production and production of "civil" purposes.

Conversion of production facilities is in the conversion process equipment, previously used in military applications, and includes determining the extent and time of withdrawal (exclusion) of production capacity from the reproductive cycle of the military sector of the national economy.

Conversion of production facilities is generally associated with the use of military products in "civilian" sectors of the economy. In this case, the products of converted enterprises in their purpose remains military, it is being "civil" purpose. Facilities will be restructured accordingly and the manufacturing equipment of these companies.

Extensive experience in the conversion process equipment, previously used in military applications, accumulated at the enterprises of rocket - and spatialware, tank-, vehicle-, shipbuilding and chemical companies.

The conversion of the economic mechanism is rebuilding (upgrading) industrial relations in accordance with the terms of the production and marketing of civil products and includes the definition of mechanisms for managing production, Finance and personnel at the enterprises of the converted (converted to sectors).

The conversion of the economic mechanism in enterprises (in industry) military production is generally subject to the necessity of adapting the converted enterprises to a more "hard" market conditions, the competitive struggle for markets of sales, labor, raw materials and financial resources.

Some opportunities for the conversion of the economic mechanism provide: restructuring management; full or partial privatization of enterprises; their unity and cooperation; as well as other tools to improve production efficiency in the new conditions of transition to the production of "civil" purposes.

To understand the content of conversion of military production is also useful to consider the experience of conversion of military production in different countries.

The first significant wave of conversion of military production certainly connected with the end of world war II.

At the conclusion of many researchers, on restructuring the military industry of the USA has passed without much difficulty. From 1945 to 1948 military spending here fell from 84 billion to 12 billion dollars. As a result, industrial production in 1946 decreased by 9 %, but in two years exceeded the level of 1945[2].

The same was successfully conducted on restructuring the military industry in the UK. The relative "ease" with which the national economy of great Britain was translated into "peaceful track" is due mainly to the significant savings of the population (pent up demand) that accumulated during the war years and the available reserves of material resources in industry. Large-scale restructuring without serious government intervention[3].

At the final stage of the Second world war the Soviet Union also began the reconversion of the military industry. Restructuring of the defense industry were implemented as planned and included a number of major activities: decrease in military spending; increasing investment in the national economy; as well as redistribution of labor and raw materials.

Was reorganized state bodies in charge of military production. Already in 1946, the restructuring of the national economy as a whole was completed: tank factories began to produce tractors, locomotives, wagons; artillery and transferred to the production of excavators, presses, drilling rigs, rolling mills; corresponding changes have taken place in light industry. For training and retraining of personnel across the country have been organized courses on professional development or learning new skills.

As a result, total industrial production in the USSR by 1948 exceeded the prewar level, and the total volume of the gross social product in 1950 compared to 1945 has almost doubled[4].

The progress of conversion of military production in Finland was due mainly to the prisoner in September 1944, a Treaty, according to which Finland had to pay the Soviet Union reparation in the amount of 300 million dollars in the period from 1945 to 1950, and not in cash, and the form of commodities at prices of 1938[5].

The main difficulty in the implementation of this Treaty was that Finland had no respite after the end of hostilities to recover war-torn economy. To obtain the necessary volume of production had to increase our production capacity, not only in civilian sectors, but also through the widest possible participation of the military sector of the economy. Thus, in Finland was carried out a forced, almost complete, conversion of the defense industry: instead of weapons to Finnish military-industrial complex had to organize the production of materials and machines, never before them unreleased.

In the end, 72 % of all deliveries of reparations of Finland to the USSR amounted to the products of engineering industry. After payment the total product decreased slightly and briefly. This was due to the increase in domestic demand for engineering products, as well as the continuation of its exports to the Soviet Union. Conversion of the military industry could become the Foundation for the formation of the new Finnish economy.

The second massive wave of conversion of military production to a great extent connected with the end of the cold war.

American experience shows that in 90-ies of some company successfully completed the conversion, but more cases of failure of conversion projects.

For example, the Corporation "Boeing" was a success in civil aerospace, defence using technology from its early programmes for the production of military jet aircraft, but are unable to create a robust trolley. Corporation "McDonnell Douglas" was not able to establish a profitable subdivision to provide "computer services" but successfully created the company "Witek" for testing of medicines.

In General, the practice of conversion of military production in the US has shown that it is not cost effective direct translation of modern specialized military industries to production of civilian products. In this regard, in the United States have not been used long and widely discussed (including in the us Congress) plans direct conversion of the military industry. The reformation of the military economy and its adaptation to new conditions was carried out by gradually retiring from the military business of numerous companies, concentration of civilian production by means of mergers and acquisitions by corporations, diversification of production of the converted enterprises, etc.

In the countries of Western Europe the conversion of military production is often accompanied by employment and therefore, to a large extent, happened with the active participation of trade unions and political parties. This has forced the governments of most Western European States to participate in the development of conversion programs, to create specialized bodies of the management and funding of conversion activities to deploy research of problems of conversion of military production.

In this regard, particularly significant is the experience of Sweden. In 1979 there was created the Council for research of problems of conversion of military production, which included representatives of employers and trade unions. The task of this Council was the development of conversion and expansion of civilian production to the military sector.

The result of the activity of the Council was the development of a national plan for conversion until 2015 in accordance with the recommendations of the UN (1981). The main feature of this plan was to develop a set of preparatory measures, which were aimed at preventing the possible growth of unemployment in the country in the implementation of conversion of military production[6].

Unlike the U.S. and other Western countries, conversion of military production in the USSR and then in Russia happened without science-based assessments of current and future defence needs of the country, without taking into account patterns of military and economic development.

After management of the USSR the political decision in 1988, the state defense order for the production of weapons and military equipment was reduced by more than 20 %. From 1991 to 1995, the total funding under the article "State defense order" has decreased five-fold[7].

This resulted in record-high rates of conversion of military production. From the beginning it has been focused on the speedy allocation of significant resources, to receive from it the maximum economic benefits in the shortest possible time.

However, due to the lack of a single scientifically developed the concept of conversion[8], a deliberate policy of its implementation, a sharp weakening of state management of the defence complex, multiple reductions in military orders, the chronic lack of financial resources[9], the uncertainty of current and future objectives "conversion expectation" is not justified[10].

Conversion of military production was carried out mainly command methods and boiled down in practice to a primitive replacement of some part of high-tech military production to civilian, to inefficient use or even destruction of the defense complex of the country.

A characteristic feature of conversion of military production in China was the search for rational ways of functioning of the defence sector in the system of centralized state planning of the economy in the stage of formation of market relations. In practical terms, the government policy of conversion of military production was quite consistent, balanced in the policy decisions and wore a bright pragmatic.

For 10 years (1979 to 1988) of the conversion process sold 300 nation-wide projects, for which spent more than $ 500 million. Subsequently, in the second decade of the program of development of national economy of the PRC for the period up to 2000 only for the period from 1991 to 1995 was carried out 350 conversion projects with a total investment of about 1 billion dollars.

As the main direction of conversion was chosen as diversification of production with maximum use of already developed technologies. We were searching for the most efficient forms of management and organization of the defense sector of the economy. However, have not been of conversion of defensive science.

Thus, the experience of the conversion of military production allows to draw some conclusions.

First, success in carrying out the conversion, generally due to its careful preparation. The conversion process itself may be a quite lengthy process, which requires attracting significant material, intellectual and financial resources. In this case, it is especially important to check how the conversion activities and the development of a mechanism of conversion transformations.

Secondly, the economic and social consequences, the results of the conversion can be evaluated only in the medium and long term.

Thirdly, the conversion of military production may take a leading role in the state, as well as the activities of political, professional and public organizations.

Fourthly, the conversion of military production involves a combination of planning and market development; government regulation of macroeconomic indicators during conversion, government support of the converted industries and businesses largely accounted for the effect of the implementation of conversion programs.

Fifthly, the fundamental purpose of conversion of military production may be: providing social guarantees of the staff of the converted enterprises and to minimize the loss of workplaces; the prevention of sharp economic decline; to support and encourage the introduction of innovative technologies; diversification of military and civilian production.

 

[1] the Concept of "military production" can have a dual interpretation: as the process of creation of products for military purposes and the aggregate production capacity, creating military products. This lecture discusses the first meaning of the term "military production", i.e. the creation of products and services designed to meet the military demand. Participate in this process of companies that fall under the official classification of military industries, and not related to the latter, but providing military enterprises accessories, or other products or services.

In the law of the Russian Federation, 1992, "On the conversion of defense industry in the Russian Federation" conversion of military production is treated as a partial or complete reorientation of redundant production capacities, scientific and technical potential and labour resources of defense and associated enterprises, associations and organizations from military to civilian use. See: The Russian Federation law "On conversion of the defense industry in the Russian Federation" // Economy and life. 1992. No. 18. In the Federal law of the Russian Federation, 1998 conversion of defence industries are defined as a regulated government process organizational, legal, technological, scientific-technical and socio-economic transformation of the defense industry in order the partial or complete reorientation to output of civil appointment previously involved in defense production production facilities, scientific and technical potential and labour resources of the organizations of defense industry. See: Federal law of the Russian Federation "On conversion of the defense industry in the Russian Federation" dated April 13, 1998 № 60-FZ // Russian newspaper. 1998. April 16.

[2] United States: military production and the economy. - M.: "Nauka", 1983.

[3] Government measures to promote the reconversion of the military industry in the United Kingdom in the postwar period, was limited to a reduction of income tax and profits tax, the payment of compensation for the war damage, the introduction of regulatory policies in the purchasing power of the pound. For more details see, for example, Socio-economic aspects of conversion of military production: the experience of Western countries. A collection of reviews / Problems of defence policy and conversion in the British research specialists (review). - M.: INION an SSSR, 1991.

[4] National economy of the USSR for 60 years. Jubilee statistical Yearbook. - Moscow: Central statistical Board of the USSR, 1977.

[5] In consequence of the repair period was extended from six to eight years, and the amount of payments reduced to 226.5 million dollars. See, for example, Socio-economic aspects of conversion of military production: the experience of Western countries. A collection of reviews / Disarmament and conversion in Northern Europe: practice and theory (review). - M.: INION an SSSR, 1991.

[6] for More details see, for example, Socio-economic aspects of conversion of military production: the experience of Western countries. A collection of reviews / Disarmament and conversion in Northern Europe: practice and theory (review). - M.: INION an SSSR, 1991.

[7] "Economics and life". May, 1996.

[8] In the late 80-ies - 90-ies in Russia was developed and adopted in at least four concepts (programmes) of conversion of military production. In particular, in 1990 year, the USSR Government adopted the State program of conversion; in 1993 year, the government of the Russian Federation approved the State program of conversion of defense industry until 1995, which became part of the Federal program of restructuring of the Russian economy; in 1995 year, the government of the Russian Federation approved the Federal target program of conversion of defense industry for 1995-1997; and, finally, in 1998 year, the government of the Russian Federation approved the Federal target programme "Restructuring and conversion of defense industry for 1998-2000".

[9] the program For conversion of the defense complex in 1992, real was allocated 42 % of the funds envisaged for these purposes in the Federal budget in 1993 to 22 % in 1994 to 10 % in 1995 to 18 %.

[10] the Result was the failure of the implementation in 1993 of all 14 Federal conversion programs, including Programs of development of civil aviation, the programme of revival of the Russian fleet, Program production equipment for fuel-energy complex, Programs of development of electronic technology, etc.

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