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Reconstitution, The Defense Industrial Base, And U.S. National Security
AUTHOR Major Joseph P. Valore, Jr., USMC
CSC 1992
SUBJECT AREA National Security
			EXECUTIVE SUMMARY
TITLE:   RECONSTITUTION, THE DEFENSE INDUSTRIAL BASE, AND
U.S. NATIONAL SECURITY
THESIS:  Given the declining state of the American defense
industrial base, our current economic crisis, and the present
realities of cutting defense spending, the nation may lose its
ability to effectively reconstitute its armed forces.
ISSUE:   Reconstitution is a critical factor in the national
security strategy of the United States.  It is a complex
process intimately linked to the defense industrial base.
Without a healthy industrial base and the ability to recons-
titute American combat power, future commanders may be prevented
from conducting sustained campaigns, and our military rendered
ineffective as an instrument of national power.  Given the
declining state of the defense industrial base, and the present
realities of reduced defense spending, the nation may lose the
ability to reconstitute its combat power.  Should this situation
occur, the very foundation of our national security would be in
jeopardy.  Since the Vietnam war, the United States defense
industrial base has slowly lost its pre-eminent status as the
world's "Arsenal of Democracy".  A number of problems have con-
tributed to the erosion of the industrial base.  Low war reserve
stockpiles, foreign industrial dependence, loss of industrial
surge potential, and a lack of leadership and focus within our
military/civil mobilization planning agencies represent major
areas of concern associated with our industrial base malaise.
These problem areas are interrelated and when combined with
unfavorable domestic economic policies and cuts in defense
spending, exacerbate the continuing deterioration of the defense
industrial base.
CONCLUSIONS:  The quick resolution of these problem areas is
essential.  The risks associated with a weak defense industrial
base, and a degraded ability to reconstitute military forces
are unacceptable.  The current status of our industrial base
represents a serious threat to America's position as a world
power in the 21st century.
                 RECONSTITUTION, THE DEFENSE INDUSTRIAL BASE,
                          AND U.S. NATIONAL SECURITY
                                    OUTLINE
Thesis Statement:  Given the declining state of the American
defense industrial base, our current economic crisis, and the
present realities of cutting defense spending, the nation may
lose its ability to effectively reconstitute its armed forces.
I.   	Military reconstitution and its relationship to the defense industrial 		base
     	A.  	Definition
     	B. 	Purpose of reconstitution and the industrial base expanded
     	C.  	Impact upon national security
II.  	Effects of a weak industrial base upon national interests
     	A.  	Post Vietnam problems identified
     	B.  	Impact of industrial base problems on the Gulf War
III. 	Major problem areas associated with the defense industrial base
     	A.  	War reserve stockpiles
		1.   	Critical minerals
         	2.   	National Petroleum Reserve
        	3.   	Sub-assemblies
     	B.  	Foreign source dependence
         	1.   	Range of goods and services
         	2.   	Implications of dependence
     	C.  	Industrial surge
         	1.   	Definition of surge
          	2.  	Impact of inability to surge
          	3.  	Factors affecting surge
     	D.   	Domestic economic policies
          	1.  	Impact upon defense industrial base
          	2.  	Non-availability of low interest loans
   		3.  	Tax incentives and depreciation
          	4.  	Foreign competition
     	E.   	Mobilization planning agencies
          	1.  	Deficiencies in current system
          	2.  	Historical background of planning agencies
IV.  	Conclusions
     	A.   	Importance of reconstitution to U.S. national interests
     	B.   	Necessity of quickly resolving current defense industrial base 			problems
                 RECONSTITUTION, THE DEFENSE INDUSTRIAL BASE,
                          AND U.S. NATIONAL SECURITY
     	While outlining the 1991 National Security Strategy,
President Bush identified reconstitution as a vital requirement
for U.S. defense strategy in the 90s.  Reconstitution is a com-
plex and multifaceted process. (9:29)  It can be defined as a
national effort involving the mobilization of civil as well as
military resources during a national crisis, to ensure the capa-
bility of increasing U.S. combat power by the creation of new
forces.  One of the essential components of the reconstitution
process is the nation's industrial base which provides the mater-
iel to equip and sustain these forces.
     	Given the declining state of the American defense industrial
base, our current economic crisis, and the present realities of
cutting defense spending, the-nation may lose its ability to
effectively reconstitute its armed forces.  If this ability
becomes significantly degraded or lost, future operational
commanders may be prevented from conducting sustained campaigns,
and the very foundation of our national security could be in
jeopardy.
     	The defense industrial base is essential to the nation's
future capability for the production and sustainment of defense
equipment and materiel required to support a rapid expansion of
the armed forces.  Inclusive issues associated with this
capability concern industrial surge potential to accelerate
production of military equipment already in the system as
well as newly developed defense systems, war reserve stock-
piles of critical minerals and sub-assemblies, foreign indus-
trial dependence, domestic economic policies, and the mobil-
ization planning interface between government and industry.
     	Based upon American participation in 20th century con-
flicts, one would expect our defense strategy to be founded
upon what should be done in peacetime to preclude war, or
should war occur, how to end it quickly and on terms favorable
to the United States.  Furthermore, historical reflection upon
past materiel requirements for ending wars would suggest that
American leadership should realize the critical importance of
a healthy industrial base and be very concerned about the
ability of the defense industry to effectively respond to
requirements of future national crises.  However, since Vietnam
America's defense industrial base has lost much of its vitality.
Its present condition suggests a serious inability to support
the President's defense strategy for the 90s.  In a 1982
Congressional report, the following industrial base deficien-
cies were exposed: increased reliance on foreign sources for
sub-assemblies and raw materials, outdated production equip-
ment, increased lead times, and increased costs. (2:115)
     	During our recent war with Iraq, many of the above-
mentioned deficiencies were still apparent and had the poten-
tial to seriously degrade the war effort had the conflict
been protracted.  For example, the Marine Corps needed to
lease 1,000 trucks from Saudi Arabia as well as additional
communications equipment to support its forces.  Both the
Army and the Marine Corps faced a shortage of Heavy Equipment
Transports required to move all their tanks and a potential
shortage of combat rations to feed their forces.  When queried
as to lead times for a production surge in critical sub-assem-
blies (currently produced in Japan) for the F-15 aircraft,
Japanese industry stated that it would require two to three
years. 
     	The key point to these examples rests on the fact that
critical industrial base problems identified in the past con-
tinue to exist.  Further, these problems surfaced during a
recent conflict which did not require full mobilization, was
not protracted, and was preceeded by a decade of tremendous
defense spending.  With this situation as a para.digm of our
current defense industrial base, what will be the result of a
continued disregard of identified reconstitution deficiencies
coupled with the current and projected cuts in defense
spending?  A closer inspection of the nation's defense indus-
trial base malaise will reveal five major areas of concern: low
war reserve stockpiles, foreign industrial dependence, indus-
trial surge potential, domestic economic policies, and mili-
tary/civil mobilization planning agencies.  All are interrelated,
contribute to the undermining of the industrial base, and in
toto combine to produce a potentially serious threat to national
security.
     	War reserve stockpiling is one method to ensure suffi-
cient raw materials, components, and/or sub-assemblies are
available for unexpected future requirements.  At the present
time, America is partially dependent, and in some cases totally
dependent upon foreign sourcing of various non-fuel minerals
critical to the defense industry.  Furthermore, many of the
minerals which are in the present stockpile are in an un-
processed or semi-finished form which would require expanded
time frames to upgrade into useable industrial material. (8:9)
The potential loss of raw material sources has concerned U.S.
leadership since World War II and resulted in the Strategic
and Critical Materials Stockpiling Act which was passed in
1946. (7:31) What we today call "the national stockpile" has
been in place since that time and serves as a critical indus-
trial base factor for mobilization planning.  However, since
its inception, no one agency or group has been able to de-
termine what the stockpile's composition should be. As a red
sult, the stockpile has never been filled to its man-dated
levels and contains excesses in some areas and shortages in
other critical areas. (7:31)  Currently the national stock-
pile is short in over 21 critical raw materials which include
the aluminum group, cobalt (used in alloyed steels for air-
craft/ships), and titanium sponge (used in aircraft frames).
Many of these materials are currently sourced from South America,
Russia and the Baltic States, India, China, and Zaire.  From
these examples it would seem that the U.S. has failed to develop
an  effective and secure non-fuel mineral policy which promotes
our national security interests.  Other areas of stockpiling
concern are the Strategic Petroleum Reserve and the stock-
piling of critical sub-assemblies for various military platforms
and weapon systems. (7:20)
     	Although the U..S. possesses substantial national  sources
of petroleum, the available supply of this vital raw material
is considered inadequate to meet future wartime demands.  In
1988 only 540 million barrels of a mandated 750 million barrels
were in the Strategic Petroleum Reserve.  Exacerbating this
deficiency is the fact that commercial and private useage rates
continue to increase while U.S. oil production and exploration
continue to decrease. (8:36-3 7)
     	The dependence upon critical sub-assemblies manufactured
outside the United States represents another aspect of a
weakened industrial base.  At present, the list of military
weapons and equipment which depend solely upon foreign manu-
factured sub-assemblies/components is significant.  Foreign
sources supplying these items include Japan and other Pacific
Rim countries, the United Kingdom, West Germany, Mexico, Israel,
and Switzerland. (6:93-95)  Critical systems such as the
Global Positioning System, the Defense Satellite Communi-
cations System, the F-16 aircraft, the Aim-7 Sparrow air-
to-air missile, the APG-36 Airborne Radar, the M-1 Abrams tank,
and the F/A-18 aircraft fall into this foreign dependence
category.  Currently, there  is no significant stockpile or
buffer stocks maintained by U.S. firms to deal with a poten-
tial loss of these components during a national emergency. (6:71)
Without these stocks, a gap in production would occur until
alternate sources could be developed.  This production gap
could take several months or more to correct.  Depending on what
stage of the conflict we were in during this time and what
defense systems were affected, this gap in production could be
disastrous to the war effort.
     	Foreign dependence upon goods and services provided to
American defense programs is possibly the most insidious of all
factors undermining the vitality of our industrial base.  An
example of the seriousness of this problem concerns the wide
range of product availability and reduced expense of foreign
products.  Recent inspections of various U.S. weapons and
military platforms identified several types of substandard
industrial fasteners (screws/bolts) purchased from foreign
suppliers.  Unfortunately, these fasteners did not meet mili-
tary specifications and proved to be less reliable than properly
manufactured ones. (7:17)  Taking this example one step farther,
it is easy to envision a situation where, due to poor products,
the lives of U.S. service personnel are needlessly endangered
and the very outcome of a battle jeopardized.
     	As mentioned above, foreign dependence upon raw mater-
ials, individual components (fasteners, semi-conductors), and
sub-assemblies for a wide range of defense platforms and weapon
systems is rampant within the defense industrial base.  This
situation poses a significant and serious threat to national
security.  Should these sources become unavailable during war,
American commanders would become hamstrung, national interests
threatened, and national security placed in jeopardy.  Several
plauseable scenarios are easily envisioned which would effectively
shut off our current-foreign suppliers.  A war in-which trans-
portation lines to the U.S. were disrupted, a conflict located
in one or more of the foreign source areas, and/or a politi-
cally controversial war in which one or more foreign source
nations implemented trade sanctions against the U.S. are all
possible scenarios.  The possibility that the U.S. could be
forced to make political concessions to foreign nations in order
to effectively reconstitute its military power is a dangerous
situation and should be viewed as unacceptable to American
leadership.
     	Industrial surge is another problem area within America's
defense industry.  When dealing with the industrial base, the
term "surge" refers to a company's ability to increase its
normal production rate by 50%-200% in response to increased
demand.  To be effective, industrial surge must also be able to
decrease the lead times required to put products into the hands
of its customers.  The ability to surge is especially critical
to the defense industrial base.  Should the U.S. become involved
in one or more wars, or be required to support allies with
military weapons and equipment, an inability to meet increased
requirements could significantly disrupt war plans and possibly
result in a lengthening of the crisis.
     	When the issue of surge was examined more closely in the
mid-80s, exercises and real world situations revealed a danger-
ous deficiency in our industrial base.  During Exercise Proud
Eagle, data from various U.S.  weapons producers indicated
that production rates after six months into a simulated crisis
were only marginally ahead of normal non-crisis levels.  After
twelve months, increases were far below projected requirements.
These results reinforced earlier Army studies regarding a surge
preparedness program for the TOW anti-tank guided missile. (6:25)
During the Arab-Israeli War, Israel requested large numbers
of tanks from the U.S.  The quickest means available for support-
ing this request was to ship tanks from U.S. forces in Europe.
However, by doing this  the European front became exposed.  To
resolve this situation the Army attempted to surge tank pro-
duction.  Unfortunately, due to capacity limitations of the
major tank turret producers, any significant surge beyond peace-
time rates was not possible.  The net result of this inability
to surge left the European theater in a vulnerable position for
a much longer period of time than was acceptable. (6:27)
     	To better understand the difficulties associated with
industrial surge, one needs to examine the economics and planning
aspects of this process.  The ability to surge is an expensive
proposition for private industry and the government.  It can be
accomplished by either stockpiling raw materials, components,
and/or sub-assemblies which are critical to the manufacturing
process, or by continually over-producing for the military who
can then stockpile the major end products.  In the former
method, maintaining  excessive buffer stocks cuts into private
industry profit while the latter case has the potential to
waste military funds on excess weapons and equipment which may
become outdated prior to use.  At present, there is no Depart-
ment of Defense doctrine for military industrial surge.  Its
integration into strategic warfighting policies and the recons-
titution process has not progressed very far. (10:72)  This
integration is critical to national security since an effective
ability to surge enables the military to support U.S. and/or
allied interests in one theater without producing a deficiency
in another theater.  It also becomes critical during a situa-
tion where multiple crises exist and require force of arms to
resolve.
     	The value of industrial surge is directly related to the
requirement for surge and how fast it can close a potential gap
in production following a war or other materiel depleting
crisis.  Additionally, the more prolonged the crisis or war,
the more critical battlefield results become.  The combatant
who has the ability to sustain and reconstitute combat power
over the long haul has a decisive advantage.  Furthermore,
maintaining an effective surge potential and the ability to
reconstitute in the immediate post-war period would be an
effective deterrent to any potential enemies who would seek to
engage us in a weakened state.
     	Given the current impact of technology upon shrinking
global distances and the proliferation of sophisticated weapons,
the U.S. may not be able to conduct a mobilization in the same
manner as in previous 20th century wars.  At present, our
material assets could easily be stressed from the outset of a
major conflict.  Unlike the past, America may not have years to
develop acceptable production rates to counter this initial
industrial stress.  Against a potential opponent armed with
high-tech equipment and a quick, first strike strategy, a U.S.
mobilization plan would have to focus on a much faster
production time to ensure sustainment and the ability to
quickly reconstitute.  A viable industrial surge capability is
essential to achieve this.  However, such a capability is not
present in our current defense industrial base.  As with other
problems areas, a major factor precluding an effective ability
to surge is its associated expense.  As U.S. force structure
is reduced and the defense budget continues to shrink, this
problem will only increase in magnitude.
     	Our present domestic economic policies represent a problem
intimately associated with stockpiling, foreign dependence,
and industrial surge.  These policies lie at the very root of
America's rapidly declining defense industrial base.  As with
any other business, the defense industry is an economic venture
and dependent upon cost-effectiveness and profit generation for
its survival.  In many cases the reason why raw materials,
components, and sub-assemblies are sourced from outside the
U.S. is not because the materials and skill to acquire them
are not available within our own boarders, but rather because
the associated high cost of doing business inside the U.S.
makes such ventures cost-prohibitive.
     	Some of the governmental economic policies which are not
conducive to a healthy industrial base were brought out in a
1982 Congressional Panel chaired by Congressman Richard Ichord.
The following excerpts represent some of the panel's conclusions:
     	Capital investment in new technology, facilities
     	and machinery has been constrained by inflation,
     	unfavorable tax policies and management priorities.
     	Trends toward excessive and unreasonable governmental
     	regulations are crippling the basic mineral industries
     	of the United States and restrictive laws and regu-
     	lations are prohibiting or making it economically un-
     	feasible to exploit minerals on United States public
     	lands.
     	The United States has not made effective use of Title
     	III of the Defense Production Act to expand domestic
     	supply and productive capacity. (10:73)
Additionally, as a result of the non-availability of low
interest, government sponsored loans, U.S. industry in general
has failed to invest in new plants, equipment, and industrial
technology.  The steel industry offers a good example of this
failure to invest.  In the early 1960's this industry was still
using and constructing open-hearth furnaces while Japan was
building steel plants which use a more efficient and cost-
effective basic oxygen process for smelting.  Ironically, this
process was developed in the United States. (2:96)
     	Aside from the loan issue, government policies on tax
incentives and industrial depreciation allowances are some of
the worst in the world.  Current government policy sets
depreciation of industrial buildings between 35-40 years and
equipment at 6-12 years.  This depreciation represents poten-
tial tax write-offs and therefore increasing profits.  However,
when taken over these extended periods, the profit is sig-
nificantly reduced due to inflation.  When compared to Switzerland
which allows 50%-80% depreciation after the first year for new
machinery and Japan which allows 95%, it is easy to under-
stand how U.S. tax policies put domestic industries at a
distinct disadvantage when competing with their foreign
counterparts. (10:76)
     	Compounding the above-mentioned constraints are additional
domestic costs linked to environmental, occupational safety,
and health laws which are absent in many foreign nations.
These non-productive costs coupled with increasing energy costs
continue to undermine our nation's industrial base.  Thus, since
World War II, groups of foreign competitor nations have arisen
and have successfully penetrated numerous American markets.
American companies unable to compete with foreign businesses
have shut down or incorporated certain foreign products into
their operations leading to the growing trend of foreign
dependence for many goods, including those vital to national
defense/security. (10:74)
     	Military and civil mobilization planning agencies represent
a final problem area which must be resolved if the defense
industrial base is to be revived and the President's desire
for effective reconstitution is to be achieved.  At this time,
there is no effective centralized organization at the national
level to oversee, coordinate, and assume full responsibility for
the nation's complex and diverse processes associated with full
mobilization, the defense industrial base, and reconstitution.
Currently, this responsibility is widely dispersed over a
plethora of agencies/committees within Congress, the Executive
branch, and private industry.  This lack of a centralized
agency was alluded to during Congressional testimony by General
Marsh in a 1988 hearing:
     	A problem common to all previous industrial base
     	studies is the lack of an integrated assessment
     	of the capability of the industrial base as a
     	whole, to support an extended mobilization. This
     	assessment is absolutely essential before a real-
     	istic plan for revitalization can be formulated. (7:18)
At the present time, relatively simple informational require-
ments to deal with various industrial problems are often over-
looked.  For instance, the exact impact of foreign sources on
future industrial surge requirements is unknown.  A data base
containing information on sub-component sources for most of
our advanced weapons is non-existent ie: there is no mobili-
zation agency that has focused on this important piece of
information and its impact upon the overall reconstitution
process.
     	The nation's past experience in mobilization planning has
been based upon the development and close integration of civil
and military planning agencies at the outset of a national
crisis followed by their dissolution or reduced staffing at
the end of each crisis.  The historical success of this method
in defining and solving mobilization/industrial base problems
during previous crises has been satisfactory, but only after
initial production delays and tremendous spending.  These
delays and initial spending surges have often been the result
of a reduced emphasis on mobilization planning during peace-
time.  The most recent results of this deemphasis on peacetime
planning  were seen in the industrial base deficiencies which
surfaced during the Gulf War.  An earlier example of this same
type of planning deficiency can be extracted from the Korean
War.  When reserve stocks of ammunition were rapidly depleted,
government-owned ammunition production facilities had to be
overhauled before adequate sustainment output could be achieved.
In a post-war study, the Army demonstrated that if $10 million
per year had been spent on maintenance of these facilities
during the inter-war years, $200-$300 million would have been
saved in subsequent rehabilitation costs! (4:11)  The above
examples clearly illustrate the problems which ensue when an
effective mobilization/reconstitution planning agency is missing
during non-crisis periods.  The future may not be as kind in
presenting the nation an extended period of time to develop
solutions for long standing problems ignored during peacetime.
     	Reconstitution is undeniably a critical factor in American
defense strategy and our national security.  As previously
discussed, it is a complex process which is critically depen-
dent upon the industrial base in general and the defense
industrial base in particular.  At present, the U.S. defense
industrial base is in a less-than-satisfactory condition and
poses a potentially serious problem to future reconstitution.
Problem areas within the base are primarily related to low
stockpiles of critical raw materials and defense related
components, poor industrial surge potential, and ineffective
planning agencies which fail to integrate the many aspects
of the mobilization and reconstitution processes.  Addition-
ally, each of these identified problem areas is being magnified
and exacerbated by non-supportive domestic economic policies
which are making it cost-prohibitive for American industry
to conduct business inside the United States.  As a result of
these short-sighted economic policies, American businesses
are being driven to overseas markets to remain competitive
and generate profit.  Within the defense industrial sector
this situation is rapidly being translated into an unhealthy
foreign dependence for the acquisition of critical war materiel.
It is this materiel which maintains our current forces and
provides a future capability to reconstitute American combat
power.
     	This significant and continuing decline in the vitality
of the defense industrial base brings with it a serious threat
to national security.  The days of a totally domestic and
robust American military-industrial complex which is able to
quickly mobilize and satisfy military requirements for war are
long gone.
     	As discussed, much of the overall problem with the
industrial base is related to economics.  The anticipated
decrease in defense spending, force structure cuts, and
politicians salivating over a mythical "peace dividend"
portends an even greater weakening in our defense industrial base.
At present, the threat of a major conflict which would require
full mobilization and significant reconstitution appears to be
a remote possibility.  However, as history clearly illustrates,
few can predict future geopolitical developments and threats to
national security.  Noting the current world political-economic
situation vis-a-vis the Middle East, Korea, and Central Europe,
it is not difficult to envision the possibility of American
military intervention in one or more of these areas at some
future time.
     	The risks associated with a nation's inability to effectively
reconstitute its military power are great and need to be care-
fully weighed against any agenda which could seriously degrade
that capability.  The potential threat of being denied an
effective and secure wartime production capacity due to poor
planning, industrial dependence upon foreign nations, and ill-
advised economic policies is an unacceptable situation for any
major nation with global responsibilities.  The quick resolution
of the problems now facing the industrial base is essential if
America is to retain its position as a world power in the 21st
century!
                                 BIBLIOGRAPHY
1.   	Ball, Nicole and Leitenberg, Milton., The Structure of the Defense 
Industry. St. Martin's Press, New York, N. Y., 1983.
2.   	Clem, Harold J., Mobilization Preparedness. National Defense 
University Press, Washington, D. C., 1983.
3.   	General Officer Briefings on Service Logistics. USMC Command and 
Staff College, 19 November 1991.
4.   	Gill, Timothy D., Industrial Preparedness. National Defense
University Press, Washington D. C., 1984.
5.   	Kolb, Avery E,, Emergency Resource Management -- Limited War.
Industrial College of the Armed Forces, Washington, D. C. 1969.
6.   	Libicki, Martin C., Industrial Strength Defense - A Disguisition
on Manufacturing, Surge, and War. National Defense University Press,
Washington, D. C., 1988.
7.   	The Air Force Association and The USNI Military Database.  Lifeline
in Danger: An Assessment of the U.S. Defense Industrial Base, The Aerospace Education Foundation, Arlington, Va., 1988.
8.   	The Fletcher School of Law and Diplomacy Conference Report. The U.S.
Defense Mobilization Infrastructure Problems and Priorities, The Institute
for Foreign Policy Analysis, Inc.., Cambridge, Mass., 1981.
9.   	United States Government. National Security Strategy of the United
States, The White House, Washington, D. C., August 1991.
10.	Vawter, Roderick L., Industrial Mobilization: The Relevant History.
National Defense University Press, Washington, D. C., 1983.



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