Military & Economic Policy Should Be Integrated

Remarks to the Reserve Officers Assn. and Woodrow Wilson Center

History records no major military power in modern times that was not also a major industrial power.

Our ability to produce advanced weapons in sufficient number without being vulnerable to delays or supply cutoffs depends on having a strong domestic industrial base.

With that in mind, I’d like to draw on my experience as a world traveler to describe a country very different from the one in which you and I grew up…

— It’s a big exporter of agricultural goods, but doesn’t build any of the ships that carry its goods to foreign markets.

— Its people own millions of gas-driven vehicles, but it hasn’t constructed a new oil refinery in over 30 years.

— It has a sizable pharmaceuticals industry, but can’t produce penicillin without supplies from China or India.

— It once was a leading producer of uranium and rare earths, but now imports those minerals from overseas.

If this sounds like a bad position for a country to be in, then perhaps it will concern you to learn that I am describing America as it exists today.

The United States has not produced a single oceangoing commercial vessel for international trade in many years, it hasn’t built a refinery since the nation’s bicentennial year, it closed its last penicillin fermenter in 2006, and over the last decade it went from being the biggest producer of rare earths in the world to being totally dependent on Chinese sources.

Rare earths are a good example of the linkage between military production and overall industrial strength, because you can’t build advanced radars, smart munitions and laser rangefinders for tanks without supplies of certain rare earths.

When the present decade began, America had the biggest rare earth mine in the world operating in the California desert.

But a combination of tough environmental rules and lowball pricing from China drove the mine out of business, so that today China has a 97 percent monopoly on the global production of these vital minerals.

Similar patterns are apparent in a wide range of other heavy industries, from chemicals to steel to glass to paper.

In steel, for instance, China now produces seven times as much as America does each year, and the U.S. steel industry has shrunk to a point where in a normal year it is only capable of meeting two-thirds of domestic demand.

When the Pentagon decided it needed to build thousands of armored trucks quickly for the Iraq war, it discovered there was only one plant left in the U.S. capable of making the required steel, and other parts of the defense industry like shipbuilders were already waiting in line for the plant’s output.

Incidentally, the plant was owned by a foreign company.

It’s tempting to blame China for America’s industrial decline, because it routinely breaks trade rules, manipulates its currency and steals intellectual property to give its producers an advantage.

For instance, 79 percent of all the software on Chinese computers is pirated.

However, the Chinese are doing no more than what America did a century ago to build up their industry, and Washington has done virtually nothing to stop them because it was so eager to embrace the promise of free trade.

If America wants to get back in the business of being an industrial powerhouse, it will have to enforce its trade rights, cut the corporate income tax, and tell environmentalists to take a twenty-year holiday.

And there is one other thing Washington needs to do — it needs to tell Pentagon policymakers to stop acting like they are neutral players in the nation’s current economic crisis.

Year after year, the Pentagon makes foolish decisions about its technology investments that hurt American workers and erode American competitiveness.

For example…

— It constantly rewrites its modernization plans and cancels programs in a way that makes efficient deployment of industrial resources virtually impossible.

— It squanders time and money on redundant tests and requirements for programs like the F-35 fighter that drive up costs and undercut export potential.

— It offers multibillion dollar contracts to foreign companies even when it knows they are selling products that only exist because trade rules have been violated.

Isn’t it kind of ridiculous that the rest of the government is struggling to revive the economy while the Pentagon — the biggest purchaser of technology in the world — does nothing to coordinate its investments with the economic recovery plan?

Is it really asking too much to tell the Pentagon it must spend its money on an American aerial-refueling tanker rather than buying it from a European company that used $6 billion in illegal subsidies to develop its own offering?

I don’t think it is, but the fact the question even can be posed tells us that there is a need for closer integration of our economic and military policies.

What we have today is a dis-integrated policy process that is hurting the nation and accelerating our economic decline.