Eisenhower Meets Trump: A New Defense Industrial Base Strategy

August 1, 2017

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In his final speech from the White House before leaving office, President Dwight D. Eisenhower cautioned the American public to:

[G]uard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists, and will persist.

While many hold Eisenhower’s words up as a warning against corporatist influence on defense spending, the narrative that an all-powerful defense industry acts as a market leviathan simply is not true. The U.S. defense industrial base has been hollowing out and consolidating for decades, leaving defense acquisition officials with numerous single points of failure in their supply chains. In many instances, only one company, out of nearly 80,000 in the defense industrial base, is able to perform sensitive technology work for the Pentagon. For example, there is just one company in the United States that can repair propellers for Navy submarines —a single point of failure. The same is true of producers of flat panel displays for military aircraft. The mining of rare earth elements has left America completely, leaving China as the sole marketplace.

This led to the announcement earlier this month of a new executive order by President Donald Trump. Titled “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States,” it seeks to address flagging imbalances in the key sectors of the defense industrial base. The decree establishes a policy for prioritizing industrial base resilience as well as a comprehensive review of the base’s health. By mandating that the Department of Defense work with the Departments of Commerce, Labor, Energy, and Homeland Security, the White House signaled that it views the defense industrial base holistically — it is composed of more than just the traditional defense sector. In this way, the executive order could kick-start an effort to bring together all elements of national power to ensure American national security. But the measure isn’t perfect. It needs to be calibrated to ensure national security leaders have complete visibility into a diverse industrial base with secure supply chains.

The threat to our industrial base has been years in the making, as supply chain specialization has made it difficult for commercial vendors to support defense requirements. Fifty years ago, Ford Motor Company was able to make civilian and military vehicles. Today, the Joint Light Tactical Vehicle is a highly specialized vehicle produced by a consortium of specialized defense manufacturers. Defense acquisition officials are also no longer the sole purchaser of many sensitive technologies. In just the past several years, foreign demand and investment for sophisticated commercial hardware, software, and rare earth elements has grown significantly.

The increase in foreign interest has coincided with the rapid closure of more than 60,000 factories as well as the consolidation of the defense industrial base. After the end of the Cold War, the dramatic drawdown of U.S. military forces appeared to validate this consolidation given the sharp decline in defense spending. This was infamously marked by the so-called  “last supper” in 1993, when Secretary of Defense Les Aspin and his deputy William Perry hosted all the major defense suppliers and informed them that the government was prepared to watch half of them go out of business unless they consolidated. This kicked off more than $55 billion in mergers over the next five years. Yet the industry became dominated by a handful of major defense contractors that performed increasingly specialized work. It is little wonder those in the Pentagon are wondering where their manufacturing resilience went.

The decline in defense industrial base capacity has been exacerbated by foreign competition and investment from Asia, and China in particular. The legacy defense electronics base in the San Fernando Valley — the original Silicon Valley — has been shriveling up for years, as has American access to rare earth metals. Competition is a good thing, yet there is also a cost to bear when choosing between quality foreign components and maintaining warm assembly lines in the U.S. for defense needs. The executive order should focus on expanding programs like the manufacturing institutes to renew and broaden the production capacity of the defense industrial base.

The review mandated by the president’s executive order would identify the raw materials and manufacturing capabilities that are essential to U.S. national security, as well as highlight contingencies that may be disrupting critical supply chains that support national security needs. America’s manufacturing resilience has always been one of its greatest strengths, but modern supply chains are sophisticated. The Pentagon’s ability to procure goods critical to the common defense will be hampered by an inability to obtain commercial sub-components indirectly related to national security. The executive order’s assessment will provide visibility into these sub-component suppliers; only then can the government make informed procurement decisions across the entire manufacturing base.

Large U.S. firms that build major defense programs like the F-35 Joint Strike Fighter should be prepared to enable this executive order by embracing nontraditional, commercial suppliers. In recent years, smaller defense corporations have won an increasingly large share of the Pentagon’s research and development budget, often by converting commercial technologies into military applications. This is an opportunity for heritage defense firms to proactively engage both small R&D contractors and nontraditional suppliers alike to ensure defense-critical technologies are seamlessly incorporated into their supply chains.

Tactically, the timing of the executive order is problematic. The assessment’s recommendations are due in April 2018, thus missing the window for the 2018 five-year budget planning cycle as well as the congressional debate over the Fiscal Year 2019 budget. Still, this directive could not come soon enough.

Eisenhower understood, and cautioned, that America couldn’t be a global power without a resilient manufacturing base to support economic and military objectives. But it is a difficult balance to maintain. While many contemporary interpretations of his final speech latch onto his warning against the influence of the military-industrial complex, Eisenhower also valued a robust defense industrial base, saying:

A vital element in keeping the peace is our military establishment. Our arms must be mighty, ready for instant action, so that no potential aggressor may be tempted to risk his own destruction…American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions.

Eisenhower was cautioning against winnowing out the commercial manufacturing that supported American national security objectives. The executive order by Trump is a step in the right direction towards Ike’s goal.

 

Stephen Rodriguez is the Founder of One Defense and a Fellow at New America’s International Security Program.

Image: United States Army Acquisition Support Center

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