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The Trap of Rearmament

The Baroque Arsenal

by Mary Kaldor
Hill and Wang, 294 pp., $14.95

Soviet Military Power

by the US Department of Defense
US Government Printing Office, 99 pp., $6.50

The East-West Strategic Balance

by T.B. Millar
Allen & Unwin, 199 pp., $12.50 (paper)

With the beginning of the government’s fiscal year on October 1, the first full year of the Reagan administration’s program to “rearm America” began as well. The American military budget for the year just begun is some $214 billion. That is 3 percent less than the administration had originally projected, before the revisions made while the president was in Santa Barbara this summer, but it is 24 percent larger than the budget of only two years ago.1

The political argument that has accompanied the administration’s budget proposal has generally conceded its basic premise: if the US hopes to be safe in the world, it should be spending more for defense. Most politicians have concentrated instead on how the extra money should be distributed among the services, or on the political dexterity that will be required to keep the defense budget rising while other forms of public spending are cut.

Some of this political debate reflects arguments that have raged for years within the military, about the kinds of machines the Pentagon buys. Specifically, the question is whether today’s weapons are too expensive and complicated to be of any practical value—or whether, on the contrary, their expense and complication are essential if American forces hope to prevail in the perilous world of modern warfare. Politicians have also paid increasing attention to the warnings, often originating on Wall Street, about the costs that will be borne by both public and private sectors of the economy if the military budget is to be raised to nearly $300 billion by 1985.2

The great virtue of Mary Kaldor’s book is to suggest a larger perspective from which to consider these disparate arguments, and to demonstrate how the decisions about the structure of our military force may have unforeseen and unwelcome implications for the nation’s industrial base.

Kaldor is a young British writer whose strength lies in delineating the economic causes, and consequences, of phenomena not obviously “economic” in nature—such as the weapons and strategies employed by a nation’s military. She is to that extent an economic determinist, which is not always the best background from which to address military questions; but in this case the benefits of her approach far outweigh its drawbacks.

One of Kaldor’s starting points is the notion of “long waves” in economic history—the cycles in which new technologies propel economic development and then eventually mature and peter out. Each wave is often associated with a specific geographical location: nineteenth-century engineering with Britain, early and mid-twentieth-century automobiles and airplanes with the United States, late twentieth-century electronics with Japan. In the early period of each cycle, growth is most dependent on “product improvements”—the inventions that push back the frontier of technology and enable companies to bring new products to the market. Later, growth depends more on “process improvements”—the techniques of mass production that were identified with America and Henry Ford early in this century but now are more often associated with Nissan and SONY. In the late stages of each wave, continued national growth depends on letting the “mature” sectors wither, so that the human and financial resources that might have been devoted to sustaining them may instead be concentrated on the search for technologies that will support the next long wave.

The significance of “baroque” technology, Kaldor argues, is that it can tie an economy to a productive system that is nearing its decadent stage. In this sense, “baroque” technology means endless improvements, at ever-higher cost and ever-dwindling marginal returns, to designs that are fundamentally unchanged. The tail fins on the old Cadillac have their military counterparts in the continual small increases in speed, range, firepower, and radar that have typified the last generation’s evolution of fighting machines.

Baroque weaponry is begotten of military conservatism, Kaldor says; when planners assume that future wars will require the same weapons and tactics as those of the past, they devote the years between wars to tuning up the old machines. American military airplanes and warships are designed for missions fundamentally similar to those they performed in World War II, but the innovations of the postwar years have made the planes roughly one hundred times and the ships fifteen to twenty times as expensive as their earlier versions were thirty-five years ago.3 Such weapons are the distinctive products of peacetime military establishments, whose decisions cannot be tested against the reality of combat and are therefore shaped by the institutional habits, interests, and prejudices of the public and private bureaucracies in which they are made. Of the resulting weapons, Kaldor says:

Modern armaments have become increasingly remote from military and economic reality. They are immensely sophisticated and elaborate; they are feats of tremendous ingenuity, talent, and organisation; and they can inflict unimaginable destruction. But they are incapable of achieving limited military objectives, and they have successively eroded the economy of the United States and the economies of those countries that have followed in her wake.4

Kaldor says that such weapons have “eroded” national economies by erecting a perverse hierarchy of values. Companies that receive government contracts during the “baroque” stage of military technology are encouraged to refine their products past the point that would be justified on purely commercial grounds. To achieve spectacular feats of “performance” matters more than ensuring reliability day by day. Their lone customer, the government, has little interest in rewarding “process improvements” that might make mass production more efficient. A small increase in the thrust-to-weight ratio of a jet engine is pursued more vigorously than a more substantial decrease in the cost of mass-producing the finished hardware. The manufacture of advanced weapons is, in Kaldor’s words, a “custom-built” approach that is the very antithesis of the productive miracle of World War II, in which the US turned out 100,000 military aircraft in 1944 alone (versus about 500 fighter planes this year, of which half are exported). She says that it is also directly contrary to the steps the United States should now be taking to strengthen its position as an economically competitive force.

Kaldor’s parable on this point is drawn from the British shipbuilding firm, Vickers, which in the late nineteenth and early twentieth centuries was a rival to Krupp and the other large armorers. Since then, it has dwindled away to nationalized penury. The company’s era of greatest prosperity began around 1880. The immediate cause was the buildup of the British fleet and the subsequent naval rivalry with Germany; the ultimate effect, Kaldor says, was to impede the economic adjustments that would have been necessary if Britain were to sustain in the twentieth century the economic primacy it enjoyed in the nineteenth. In the nineteenth century, Britain’s wealth had grown from “the steam engine, new methods of coal mining, new iron and steel processes, the railway, and above all machinery…. After 1870, their existence, embodied in brick and steel and human skills, gradually became a liability to the newly developing technologies of chemicals, electricity, and automobiles.”5 A major cause of Britain’s economic rigidity, Kaldor says, was the investment in capital-intensive military projects based on the older technologies, of which battleship-building was the most obvious example. In channeling so much of the national treasure toward the sector symbolized by the Vickers corporation, Britain enabled companies and technologies to survive that would otherwise have shrunk or failed.

The parallel that Kaldor draws is to the political economy of American weapons in the post-World War II era. Between the wars, the military affected only a tiny fraction of the US economy; military spending represented about 1 percent of the gross national product in the twenty years before World War II. (It rose to more than 8 percent during the Kennedy administration and is about 5.5 percent now.) Once the United States entered that war, its ability to sustain mass production was its decisive edge. Two of the most important items of production, tanks and military airplanes, were based on two of the most important and strongly growing civilian industries—automobiles and aircraft. After the war, the “follow-on” generations of weapons remained tied to these two industries, along with shipbuilding; but the cost and complexity of the weapons went up, and their numbers declined. As was the case during the race to develop dreadnoughts before World War I, military contracts encouraged the exotic rather than the efficient within the industries that produced new generations of weapons.6 And, Kaldor concludes, the flow of resources toward these maturing industries in the 1960s and 1970s has made it harder for the US to meet the competition of the Japanese and Germans in the 1980s.

The strongest evidence for her case is the erosion of the American automobile and consumer electronics (i.e., radio and televison) industries. The original inventions in these fields came, in general, from the United States. The “process improvements” that have driven costs down and off-the-assembly-line quality up in the last fifteen years have come, in general, from the Japanese or Germans. The most troublesome evidence for Kaldor’s thesis might seem to be the American semiconductor industry, based on computer “chips,” which has been suffused with military contracts since its earliest moments but which has been the nation’s greatest industrial success story of the past generation. No contradiction, Kaldor says: it is a question of different stages of the “wave.”

Through the 1960s and most of the 1970s, the semiconductor business was revolutionized by one dramatic new invention after another—chips with larger memory capacities, then “microprocessors” that incorporated the capacities of an entire computer on one small silicon square. Military projects, with their emphasis on the frontiers of performance, were exactly right for a business in this stage of development, Kaldor says; and without the demand created by military contracts the American industry would never have progressed so rapidly. But within the last few years the semiconductor business has begun to change. The emphasis has swung toward high-volume production of more standardized products. Japanese manufacturers, such as Nippon Electric Company, have tried to establish a competitive edge through lower costs and more stringent quality control. American firms, learning from the failure of the auto makers, have attempted to compete with the Japanese on the same terms before it is too late—and have found military business to be a hindrance in their effort to do so.7

The new military buildup will dramatically increase the demand for chips—but, as Robert Reich pointed out in his recent analysis in The New York Review (November 19), it may place the American industry at an even greater disadvantage in its struggle for survival with the Japanese. The Defense Department is looking toward a new generation of large-scale integrated circuits, whose characteristics will be tailored to military needs. To enter the market would divert American manufacturers from the far larger, and ultimately more important, commercial market; but to leave the development of such new products to the Defense Department (as is the current plan) may have the equally destructive effect of siphoning the nation’s scientific and engineering talent away from private manufacturers. Either choice bodes ill for the American industry’s hopes to survive in competition with the Japanese.

  1. 1

    These are comparisons of the “Total Obligational Authority” for fiscal years 1980 and 1982. Both figures are in “constant 1982 dollars,” to remove the effects of inflation.

  2. 2

    Stated in “constant 1982 dollars,” the administration’s initial proposal for fiscal year 1986, which begins on October 1, 1985, was $292 billion.

  3. 3

    Once again, this is a comparison in “constant dollars” to remove the effects of inflation.

  4. 4

    The Baroque Arsenal, page 3.

  5. 5

    The Baroque Arsenal, page 31.

  6. 6

    The difficulties that innovative firms faced are illustrated by a small high-technology company named Julie Research Laboratories, Since the early 1970s, Julie has been trying to get the army to adopt the company’s calibration equipment, which, according to a number of government tests, is more reliable, faster, more accurate, cheaper, etc., than the competitive systems the army now buys. In his frustration, the head of the company, Loebe Julie, commissioned a cartoonist named Dick Hafer to produce two comic books to tell Julie’s story. The books, “You’re Not Supposed to get Mugged by Your Own Army” and “Where Were You During the Coup?” are available without charge from Julie Research Laboratory, 211 West 61st Street, New York, New York 10023.

  7. 7

    This pattern is evident when two sources are compared. One is the trade literature of the Semiconductor Industry Association and the public statements of officials from such companies as Intel, Mostek, and others. They stress the importance of developing the efficient—and very costly—production systems necessary to produce standardized chips in large volume, so as to compete in the world market. The other source is the small mountain of government reports about the difficulty of keeping high-technology contractors in the defense business, largely because of the unusual specifications the companies must meet.

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