Industrial Contraction: Facing the Paradoxes of the Post-Cold War

INDUSTRIAL CONTRACTION: FACING THE PARADOXES OF THE POST-COLD WAR by Jacques S. Gansler T,he post-Cold War era has required the United States to change abruptly its security and economic policies. As we set out to create new policies, however, we confront contradictions everywhere. We expected a "peace dividend," but instead we face unemployment and bail-outs of the defense industry. We expected peace and stability in the world, but we have witnessed increased regional conflicts and a rapid proliferation of arms to unstable nations. In fact, in both security and the economy, domestically and internationally, the post-Cold War has brought on more paradoxes than solutions. Current Paradoxes • For the domestic economy, peace has led to higher unemployment. The end of the Cold War clearly cries out for a conversion of the defense industries to civilian use. But the conversion ofthis costly, highly specialized sector has historically proven very difficult; even when successful, it has taken years. In past post-war periods, pent-up civilian demand and a growing economy greatly aided the conversion process. Neither feature Jacques S. Gansler is Senior Vice President of TASC. He is a former Deputy Assistant Secretary of Defense, a former electronics industry executive, and the author of Affording Defense (MIT Press, 1989) and The Defense Industry (MIT Press, 1980). Since 1984, he has also been a Visiting Scholar at the Kennedy School of Government, Harvard University. 105 106 SAIS REVIEW appears in present circumstances. Cutbacks, unplanned and underway in a period oflittle commercial growth, have produced a dramatic increase in unemployment. For example, some estimate that a quarter ofthe currently unemployed workers in the United States resulted from defense industry cutbacks; and another 1.8 million workers are likely to become unemployed over the next four years as the defense budget continues to fall. Partly to minimize the political impacts ofthe cutbacks, both the executive and legislative branches are underwriting some weapons programs not for security reasons but simply as subsidies to keep plants open. Neither branch possesses a long-term view ofthe consequences ofthese large investments . Instead, the support stems from the hope of deferring immediate hardships. In the fiscal 1992 defense budget, Congress added more than $8 billion worth of programs for the sole purpose of keeping production lines open. On many ofthese programs the Department of Defense did not even request the funding. Thus, the billions that many expected to emerge from the "peace dividend " after the Cold War are not going for necessary investments in schools, bridges, and highways. Instead the money goes to pay unemployment checks and provide the defense industry with short-term subsidies. Neither choice will provide long-term economic stimulus, norbenefits to the nation's enduring security, nor the required incentives for the defense industry to pursue aggressively the lengthy process of conversion. • As to how the United States plans to direct its armed forces, the new weapons the Defense Department requires for future regional conflicts are unaffordable with the declining military budgets. Although Operation Desert Storm proved highly successful, it and the Grenada and Panama operations have shown that after the Cold War, military superiority will require new and different types of equipment. For the past four decades of superpowerconfrontation, defenseprocurement resources wentprimarily to strategic nuclear forces and to heavy armor and big bombers for a potential European conflict between NATO and the Warsaw Pact. Yet when the U.S. went to Panama, we could not use M-I tanks because they were too heavy to go over bridges, and when we went to the Persian Gulf, we held the B-I bomber in reserve because we found it inapplicable to that mission. As we cut back on the U.S. force structure, furthermore, our propenderance of equipment for a Central European war contrasts with insufficient means in areas such as anti-ballistic missile defense; in all-weather, worldwide surveillance; in precision-guided weapons; in the location and destruction ofmobile targets, and in tactical deployment of real-time intelligence and command-management systems. The problem is that with the projected declining defense budgets and the increasing sophistication and expense of advanced weapon systems, it is INDUSTRIAL CONTRACTION 107 unlikely that any...