Compensating for Smaller Forces

Quantity vs. Quality

by James Blackwell

Quantity versus Quality

For decades during the cold war, American national security strategy has explicitly relied on technological superiority to overcome acknowledged quantitative shortcomings. We have never intended to match our potential opponents man-for-man or gun-for-gun. We have instead opted to apply the creative genius of the American character to the design and development of better weapons, both for the defeat of the enemy and for the protection of American fighting men and women. This approach served us well during the cold war and it was vindicated by the low casualty rate of the Persian Gulf War. But will it be the best way to apply limited resources for the future?

One hazard in continuing to pursue technological approaches is that if the total U.S. defense technological effort declines, we may lose our relative advantage over potential adversaries. Already, the diffusion of technology has brought a number of Third World states into advanced technology bases of their own in various fields including electronics, nuclear weapons, precision guided weapons, command and control systems, missiles and others. U.S. military technology policy and investments must be directed to ensure that we stay ahead of potential opponents (in terms of greater capabilities and countermeasures) and must also help dampen, or at least provide some control over, the proliferation of advanced military technologies.

A second consideration has to do with the evolution of the arc of war. Having just come though a military technology revolution, have we reached the limits of the leverage we can get from technology for the present era? While it may be somewhat un- American to suggest that we might not be able to create new breakthroughs in military technology in our lifetime, history teaches us that such technological revolutions occur neither at a steady state nor at regular intervals. Preeminent military historian Trevor Dupuy has observed:

The dates of the significant advances of the age of technological innovation are curiously bunched. The conoidal bullet, an effective breech-loading rifle, and breech-loading rifled field artillery appeared between 1841 and 1849. The modern machine-gun, the high-explosive shell, the Mauser bolt-operated magazine rifle, smokeless powder, and quick-firing modern artillery appeared between 1883 and the mid-1890s. The tank and fighter bomber appeared in a two-year period in World War I (1916-1917). Ballistic missiles and the atomic bomb were introduced within a year of each other in World War II. [8]

It is premature to eulogize the passing of the current military technological age, but a strategy which counts on the continuation of the current revolution must hedge against the historical probability that we are near the end of the current "bunching" period.

Finally, dependence on technological superiority might not work. While it did work under the circumstances of the Persian Gulf War, it did not work under the less favorable conditions of the Vietnam War. In many ways, World War II German military technology outclassed American systems. But America's superior ability to produce greater numbers of good weapons was instrumental in overcoming the limited numbers of advanced systems the Germans could bring to bear during the war. Even in the Persian Gulf War it was not the technology alone that caused the defeat of the Iraqi forces in the field; "people" factors were more important. The combination of a highly motivated, well-trained force under superb leadership employing combined arms operations doctrine which exploited the technology was decisive. Again, history teaches that superior technology does guarantee victory in battle. [9]

Technology Bust

The third risk of pursuing a technology superiority strategy is that technology may fail to continue to progress. It has become an article of faith that the United States is the engine of technological advancement. We have become accustomed to an ever accelerating pace of improvements in our ability to apply science to improve productivity and to solve new problems. But we do not understand the process very clearly and there is no guarantee that we will continue to reap the. benefits of technological change.

Economist Frederick M. Scherer has argued from a Schumpeterian perspective that:

It should not be concluded that there is a necessary correlation between the magnitude of research and development expenditures and the importance of inventions produced. Many major advances in science and technology have been brought into the world at relatively little expense ... On the other hand, the enormous outlays made to create many of our very complex new products and processes frequently contribute little in the way of basically new technology. [10]

Joseph Schumpeter held that technological change is indeed the engine of prosperity in capitalist economies, but that it was not competition which stimulated technological progress. Instead, he believed that the expectation of a monopoly position was the motivation behind invention which, in turn, produced technological innovation and economic growth. Schumpeter' wrote, "In this respect, perfect competition is not only impossible, but inferior, and has no title to being set up as a model of ideal efficiency."' [11] Scherer takes the argument a step further to point out that in the creation of basic inventions it is the intangibles which dominate:

Physical resources allocated to the support of basic research, or simply to bringing scientists and engineers into contact with the unsolved problems of technology, provide the institutional setting where these intangibles operate. But when, where, and how a basic invention will occur is difficult if not impossible to predict. [12]

The fact that it is the expectation of monopoly profits that stimulates innovation was confirmed in a more recent work by Eric von Hippel. Von Hippel surveyed innovations in a cross section of industries to determine if there was a relationship between the source of innovation and the type of industry. He found that the functional source of innovation varies widely and cannot be predicted:

In some fields, innovation users develop most innovations. In others, suppliers of innovation-related components and materials are the typical sources of innovation. In still other fields, conventional wisdom holds and product manufacturers are indeed the typical innovators. [13]

But he also concluded that those firms which did successfully innovate could "reasonably anticipate higher profits than non-innovating firms." [14]

In the industrial sectors which are important to defense technology, the record of financial performance has not been favorable for meeting such expectations. [15]

American companies are becoming increasingly unwilling to do business with the Defense Department (DoD). There was in the 1980s a virtual stampede of producers out of the defense business. In 1982 there were more than 188,000 companies providing manufactured goods to DoD. In 1987 there were fewer than 40,000. Some that left went out of business altogether, including 20,000 small companies. But most companies have simply quit doing business with DoD and have opted for more reasonable customers. This is remarkable, because at the same time the defense procurement budget grew from $54.9 billion to $87 billion in constant fiscal 1989 dollars.

Defense business simply is not being pursued by profit-seekers. In fact, many companies that are highly dependent on defense business for survival are engaged in behavior, such as predatory pricing, that in other sectors would be illegal or suicidal. In the sometimes perverse world of defense contracting, such behavior is often the only way to survive.

The reason is that defense is, comparatively, not a profit-making business. Return on sales in defense has been about the same overall as in commercial manufacturing, falling from 4.9 percent in 1980 to 3.8 percent in 1986. But many defense sectors posted precipitous declines in this time; and, remember, those profits had to go to pay the 25 percent defense inefficiency premium. Return on fixed assets (ROA) was higher in defense manufacturing (44.7 percent) than in commercial manufacturing (11.3 percent) in 1986. But those apparently favorable ratings mask some troubling basic trends.

Defense is one business in which a company does not own all its production facilities. Many are owned by the government. Much of the capital equipment that defense companies do own is old and has been depreciated well beyond zero in present value. Thus, the book value of the assets held by defense contractors is artificially low. ROA is thus not a good measure of profitability in the defense business. At any rate, ROA in defense sectors declined by over 4 percentage points from 1980 to 1986, including huge drops in small arms, aircraft and shipbuilding.

The drop in profitability in the defense industrial base is reflected in the investment climate surrounding the military manufacturing sector. In U.S. manufacturing as a whole, the ratio of capital spending to value of goods shipped was 3.8 percent in 1980 and 5.4 percent in 1985. The defense industrial base performed worse, actually falling from 3.9 percent in 1980 to 3.5 percent in 1985, while capacity and productivity in defense sectors were no better than in manufacturing overall.

One of the most important national security aspects of industrial performance is import penetration into the domestic industry. In total, the import penetration grew between 1980 and 1986 in 104 defense sectors out of 122 sectors for which data available.

So who is to say that our explosive technological progress experienced since the end of World War II will continue? And even if it does, can we count on always being ahead of our potential military opponents in relative terms? Already, the Defense Department has identified a number of technologies critical to national security where foreign countries either have a lead or could soon gain it. [16]

And even if our potential adversaries cannot soon match all or most of our military technologies, they may be able to deny us the advantage of those technologies by developing countervailing technologies in other fields. The risk of reaching "technology bust" in pursuing our strategy of technological superiority is at once the least understood and potentially the most dangerous.

A strategy of depending on technological superiority served us well during the cold war. It went a long way to deterring conflict in the first place and, when properly employed by skilled military organizations operating within clear and achievable political mandates, it was instrumental in winning the wars which did occur. It served to compensate for the unbearable burdens that would have been necessary to accomplish the same ends with a large standing armed force capable of meeting our principal opponents in quantitative terms. It was, in fact, a force multiplier.

For the future, technology may well continue to deter potential threats to US interests. While it may be difficult to determine how long a shadow U.S. technological dominance casts, [17] there is some leverage to be obtained from maintaining our technology lead. In fact there may be new strength for conventional deterrence from the dramatic demonstration of U.S. military technology during the Gulf War. [18]

But a continuation of the strategy of technological dependence should not go unquestioned as we move into the new strategic era. There are risks inherent in the strategy and those risks are not well understood at present. Much more analysis must be put into efforts to assess the nature and magnitude of the risks and to develop affordable insurance policies to hedge against those risks.

More Prospects and Risks of Technological Dependence

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