The defense business is dropping like a rock. When it finally levels out, according to some estimates, Pentagon procurement may amount to only a third as much as it did in the boom years of the 1980s.
Much of the defense industry would be gone before things sink that far. Prime contractors are already releasing workers by the tens of thousands. Nobody knows for sure how hard the impact has been on small firms in the supplier and subcontractor ranks.
Until recently, the only people worrying about the defense industrial base were those concerned about equipping and sustaining the armed forces. Now, as plants close and jobs disappear, the alarm has spread. The problem has gotten severe enough to cause regional downticks in the economy.
Popular causes need popular titles. The one in fashion for this problem is “conversion.” It covers a range of ideas about how the defense industry can convert to civilian production. A host of committees, commissions, and other groups have taken up the banner.
Most of them declare a determination to provide for the industrial needs of defense. Some activists, however, seem more interested in channeling money to a broad “national infrastructure,” which can be defined as including almost anything that anybody wants to fund.
There is considerable doubt about the basic concept of conversion. As the committees and commissions have been reminded, there are few examples of industries making the leap successfully from swords to plowshares.
The demobilization that followed World War II has been cited as a model, but as Kenneth L. Adelman and Norman R. Augustine said in Foreign Affairs last spring, that was an instance of reconversion. Firms temporarily engaged in defense production went back to their regular prewar product lines.
If the straight swap-out model of conversion is feasible, it might solve some employment and economic problems, but it does not necessarily cover defense needs. The armed forces are not buying that much at present, but they will have requirements in the future, and they are left in the lurch if the defense industry vanishes.
The answer to that, supposedly, is generic industries that can swing back and forth between military and civilian output. Like conversion, that is a swell-sounding idea, but we have few examples of such remarkable agility, and the concept is, to put it mildly, unproven.
As new defense systems–when there are any–pass through the development process, steps will be taken to ensure that an industrial base exists to support the acquisition. That is probably sufficient to provide for planned, peacetime production.
If we accept the peacetime standard, then we must also sign up to the corollary: We can envision no contingency where we cannot prevail on a 100 percent come-as-you-are basis, and, when conflict ends, we can reequip and resupply ourselves back to an adequate defense posture.
Operation Desert Storm lasted 42 days. Except for minor items and consumables, there was no requirement for industry to expand production. Toward the end, though, thin spots had begun to show.
The Gulf War surge was handled magnificently by the depots and materiel commands of the military services. They drew upon strong stock levels built in the 1980s and mounted an incredible effort to keep the airplanes flying and the bombs and bullets coming.
Today, the logistics centers are taking heavy budget cuts. They compete with the manufacturing industrial base for work. Like the defense firms, their capabilities are being converted right out the door.
Some theorists may regard this as good news. The nation is shedding its cold war mindset. The free market, with a little help from its friends, is reallocating resources in a greater economic scheme. The source most frequently mentioned for financing this transformation is–what else?–the already-depleted defense budget.
There are no easy solutions to the defense industrial base problem. As Adelman and Augustine also said, you can’t manage a free-fall. It becomes certain that no solution will be found if conversion officials lock their attention on building a “national infrastructure” or a redistribution of federal money.
It is unlikely that the United States has fought its last war or faced its last enemy. When crisis comes again, it may prove a bad bargain to have traded all the munitions plants for dog food factories. Next time, maybe we can drop some of that national infrastructure on the bad guys.