Let’s Use the ‘Peace Dividend’ to Rejuvenate U.S. Science and Technology

In 1992, the United States will spend $295 billion on defense. In real terms this is about the same amount we spent at the height of the Cold War, when the massive weapons of the Warsaw Pact were aimed at our cities.

But the Warsaw Pact is no more. Half of our military spending is now devoted to defending Japan and Europe from an alliance that no longer exists. The Pentagon, searching for a new mission to justify its huge budget, has proposed that, instead of protecting our old allies, we try to prevent them from becoming rival military superpowers.

Most Americans outside the Pentagon’s five walls would like to see major cuts in the military budget. And, according to a growing number of objective analysts, military spending can be halved over the next 10 years without endangering the nation’s security. Even after a 50% reduction, the United States would be devoting the same share of its national output to defense as its allies now do.

A substantial peace dividend therefore exists. It would be criminal to waste it. But the transition from a Cold War economy to a peacetime economy will not be painless.

The Pentagon is still the country’s best customer, largest employer and most generous provider of funds for research and development. As it shrinks, the economic effects will reverberate at home and abroad. Defense contractors will be forced to shift their industrial capacities and scientific personnel to civilian pursuits. Those who are unsuccessful will be faced with bankruptcy and extinction. Military bases will be closed and the surrounding communities left to rebuild their local economies. Defense-related employment will plummet.

Indeed, the costs of conversion have already started to mount. Nearly 150,000 defense industry workers were laid off in 1990, and another 100,000 lost their jobs in 1991. According to Defense Secretary Richard Cheney’s revised budget plan for 1992-97, active-duty troops will be reduced by almost 350,000, defense department personnel will be cut by almost 150,000, and more than 800,000 defense industry workers will lose their jobs in the next six years. If defense spending is cut by 50% rather than the 25% to 30% now planned, even more workers will be displaced. During the last two years, much smaller cuts than these have prolonged the recession, accounting for about one-third of the drop in industrial production.

Many economists, believing in the power of the market to cure all ills, see no need for government conversion measures to ease the transition of defense companies, communities and workers. According to this Panglossian view, all economic adjustments--whether necessitated by a shift in consumer spending patterns, an increase in foreign competition or the collapse of the Cold War world order--are painful but necessary. To ease the pain is to slow the inevitable and ultimately beneficial process. But this perspective misses two crucial realities.

First, the decision to cut military spending is not a market decision--it is a political one. And it can be compromised, if not reversed, by political considerations. Already members of Congress are dragging their feet because of the adverse impact of military cutbacks on local jobs and communities. Jobs are also the rationale for the aggressive lobbying effort by McDonnell Douglas to win congressional approval for sales of advanced F-15 aircraft to Saudi Arabia. As these early warning signals suggest, the hard-earned peace dividend and the nation’s broader geopolitical interests may be sacrificed to the exigencies of job creation in a stagnant economy. Wouldn’t it make more sense to use part of the peace dividend to fund new government programs to address the issue of jobs directly and rationally?

Second, military (hence government) spending has played a critical role in the development of most of the nation’s high-technology success stories. Machine tools, semiconductors, computers and commercial aircraft are among several high-technology industries that have benefited from multifaceted Department of Defense support, in the form of guaranteed markets, R&D; funding and subsidized credit. Even now the military supplies about 60% of the $70 billion the federal government spends on research and development. If we slash military R&D;, the 1991 budget agreement requires that the savings be used exclusively for reducing the federal deficit. Wouldn’t it be better to convert these savings into funding for commercial science and technology, on which the nation’s future competitive health depends?

To make the most of the peace dividend, a comprehensive conversion program is an urgent priority. Several Democratic members of Congress are working on such a program. In addition, the National Commission for Economic Conversion and Disarmament, a private-sector think tank, is lobbying for such an approach.

This group’s program outline is clear: Communities must have access to financing for redevelopment programs if they are to develop non-military business to re-employ workers and salvage the small- and medium-size firms vital to their economies. Defense contractors need economic incentives and financing to develop new products, retool, reorganize production and marketing and retain their employees. A comprehensive GI bill should be enacted to support education and job training for demobilized military personnel and laid-off defense workers. Finally, public funding for R&D; should be shifted from the Department of Defense to a civilian agency charged with the task of supporting dual-use or commercial science and technology.

On the conversion question, as on so many other questions crucial to the nation’s future, the Bush Administration is hamstrung by an outmoded and irrelevant ideology, blindly and inappropriately applied. Like the military buildup, the military scale-down is no simple market phenomenon, amenable to simple market solutions. It is nothing short of a massive reordering of national priorities that threatens the livelihoods of millions of citizens and communities.

As the nation confronts the new demands and opportunities posed by the end of the Cold War, it would do well to recall the words of Abraham Lincoln, a far more visionary Republican President: “The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise to the occasion. As our case is new, so we must think anew and act anew. We must disenthrall ourselves, and then we shall save our country.”