Going For Broke

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Indeed, the areas in which the United States competes well with other nations are increasingly those concerned with "military tech." Yet even those areas may not serve us well in the future, as the military pursues state-of-the-art advances that are less useful for civilian applications than advances that improve economy and reliability. While the Japanese develop cheaper, more reliable computer chips with greater storage capacity, the U.S. military seeks the development of much higher speed, much costlier chips. More than 70% of the latest generation of computer chips sold in the United States were built in Japan. Once, we dominated the market.

It is in fields like this -- information processing and civilian aerospace -- that military demands are most likely to push up costs by straining capacity. That could ignite not only a new round of inflation, but it could also choke off the worldwide competitive viability of the very industries that many economists look to for the growth stimulus for the '80s. According to an analysis that appeared recently in The New York Times, the currently projected levels of military acquisitions will create inflation, production bottlenecks, and excess capacity in a number of industries, notably microcomputers, industrial plating, machine tools, aerospace, glass, and industrial ceramics.

Unprecedented levels of military spending also distort job creation. A recent study by Employment Research Associates (using the Bureau of Labor Statistics Input-Output Model of the U.S. economy) found that spending for weapons actually costs more jobs than it creates. Retailing and basic industries such as steel and automobiles tend to be especially hard hit.

It isn't just a matter of cleaning up what David Stockman called the $30 billion "swamp" of waste in military procurement, although that certainly needs to be done. It is more a matter of addressing the main goal of all military spending -- ensuring our national security.

What, exactly, is national security? The more we think about it, the more we realize that it must be based on factors like the strength of our economy and the morale of our people, just as much as it is based on the quantity of our arms. Some years ago Dwight D. Eisenhower expressed this thought well: "No matter how much we spend for arms, there is no safety in arms alone. Our security is the total product of our economic, intellectual, moral, and military strengths."

Has the heavy defense spending of the last 10 years made us more secure? Has it actually been good for business?

How much is our security enhanced by the last $1 billion or $10 billion spent on weapons in any given year? The difference between an increase of more than 9% a year in spending, as President Reagan has called for, and 3%, as Sen. Ernest Hollings (D-S.C.) and others have called for, amounts to more than $250 billion by 1987. How much of a federal budget deficit is too much? And how much crowding out of private investment can we tolerate? Congress is weighing these options now.

Business executives could be a great help in resolving this debate by developing practical alternatives to economically destructive policies and by articulating a business perspective on military spending practices. This is the reason that a number of us have formed an association we call Business Executives for National Security Inc.

We want to contribute our business experience in assessing risks, in weighing costs and benefits, and in identifying commonsense plans of action. The dividend on our investment will be a return to general business prosperity.

Eisenhower's remarks on military spending, quoted above, continued for a few more lines. Now is a good time for us to heed his further wisdom:

Let me elaborate on this one great truth. It happens that defense is a field in which I have had varied experiences over a lifetime, and if I have learned one thing, it is that there is no way in which a country can satisfy the craving for absolute security -- but it can easily bankrupt itself, morally and economically, in attempting to reach that goal through arms alone. The Military Establishment, not productive in itself, must necessarily feed on the energy, productivity, and brainpower of the country, and if it takes too much, our total strength declines.

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