The U.S. defense industry after the Cold War

ORBIS, Fall, 1997 by Murray L. Weidenbaum

The U.S. defense industry is adjusting to the end of the cold war far more rapidly and effectively than was generally expected. Many of the changes to date have been painful and the end of the adjustment process is not yet in sight. But while today's national security decisionmakers can count on the presence of a strong defense industrial base, that positive situation cannot be taken for granted in the years ahead. This article offers one economist's evaluation of the challenges facing the U.S. military establishment and the private-sector companies on which it so strongly relies.

To judge the adequacy of the future defense industrial base in an uncertain post-cold war environment is indeed a challenge. It requires dealing simultaneously with a set of paradoxical needs: to develop an international orientation at a time when the nation is focused on domestic concerns, to consider expanding military outlays in a period of budgetary austerity, and to wont about the adequacy of competition for the production of weapon systems when the economy is in the midst of a wave of mergers, consolidations, and downsizing.

This is a tall order, so let us begin with fundamentals. As an ex-defense industry planner, I instinctively start by examining the major threats to the national security. To state the obvious - although it may not be so clear to all Americans - the United States continues to exist in a dangerous world.

The Changing Threats to National Security

The danger to U.S. security is no longer an army of Soviet strategic systems presumably aimed at the nation. Those missiles and bombers may not now be aimed at the United States, but - and this is a crucial "but" - the uncertain control over the technological and military resources developed by the Soviets is far from comforting. Developing countries in Asia have been acquiring a wide variety of high-technology equipment - including SU-27 attack aircraft, MIG-31 fighters, T-72 tanks, and MI-17 helicopters - from the spin-off nations of the former Soviet Union. More significantly, China is emerging - once again - as a great power, both economically and militarily. Credible sources report that China is buying two or more Russian-made Sovremenny-class missile destroyers armed with SS-N-22 supersonic antiship missiles.(1)

Simultaneously, large and indeterminate assortments of terrorists and other troublemakers are developing the capability to do considerable harm to the people of this country and its allies. Americans have to be concerned when they read reports such as the following:

At several naval bases around Vladivostok, about twenty-four highly radioactive reactor cores cut out of dismantled nuclear submarines are either floating in bays or sitting in unsafe ground storage. Guards at the Vladivostok bases frequently go several months between paychecks. Meanwhile, thousands of Chinese traders and entrepreneurs have been drawn to the city. According to one Russian investigator of the loss of nuclear fuel, "Potatoes were guarded better than naval fuel."(2)

Biological weapons, which are far easier to manufacture, transport, and disseminate than any other type weapon of mass destruction, are of growing importance in the post-Soviet environment. Anthrax, for example, can be made by a biology student in a lab the size of a microbrewery. A small suitcase can contain enough to kill hundreds of thousands of people. As for the delivery platform, anthrax can be readily sprayed from a crop duster.(3)

Between 1991 and 1996, about five thousand employees left the Ukrainian Southern Machine Building Plant. That facility specializes in developing and producing SS-18 missiles. During the same period, the All Russian ScientiFic Research Institute of Experimental Physics, which specializes in nuclear warhead R&D, also lost about five thousand people. All in all, the numbers of unemployed scientists and engineers in Russia and other parts of the former Soviet Union are at a record high.(4)

Reports like these are juxtaposed with news that Libyan and Iranian "university representatives" are stepping up efforts to recruit various categories of scientists. All of this brings to mind the lament of a speaker at a recent conference on national security: "Peace is hell."(5)

Surely, today's situation requires a different response than that which was appropriate during the cold war - in terms of intelligence and communication, force structure, planning and strategy, and research, development, and production capability. But that does not necessarily mean a drastically lesser response. The United States needs to be able to deal with a new spectrum of conflicts, ranging from low-intensity and urban warfare, to serious situations of global crime and lawlessness, to conventional confrontations between major national powers.(6)

Viewed in this light, the current practice of cutting back the military equipment and personnel required during the cold war is not the end of the process of adjusting to a changed external environment. Rather, it is the beginning. At a time of tight budgeting, it is of course foolish to devote the limited funding to activities supported more by sentiment for the past than by the needs of the future. While military pork was never fully justified, the "opportunity cost" of such indulgences is higher than ever.