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Defense Industrial Policy

In reference to the Defense Watch editorial, “Managing the Defense Industry: Stalinism or Smart Business” (Nov. 2011, p.9), Ms. Erwin started with a reasonably interesting article that appeared to present the various sides of the issue. But the conclusion, especially the suggestion attributed to Marty Bollinger (director of Booz & Company’s aerospace and defense practice) to proceed with a “defense industrial policy” but obfuscate it by changing names, is not only disingenuous but outright dishonest.

To support his position, Bollinger suggests, “Toyota, Ford or any major corporation does industrial planning on a routine basis. They scrutinize the supply base, identify areas where they want competition, and select suppliers with which they want long-term relationships.”

That is a nonsensical comparison. Of course corporations plan. That is how they stay ahead of the competition and appeal to the customer. That is how capital markets work. But the point of the article is for the Department of Defense to do the planning; to scrutinize its supply base, identify areas where it wants competition and select suppliers with which it wants long-term relationships. See the difference?

Want an example of stupid government central planning? Consider the discussion about “cheap liquid fuel” in the Nov. 2011 cover story, “10 Technologies the U.S. Military Will Need For the Next War.”

The services want “green energy” fuels to power their fleets even though none are commercially available at a reasonable price. Air Force Gen. Ray Johns Jr., the commander of Air Force Mobility Command is quoted: “I can’t go to the new market until the market exists.” The presumption is that biofuels are currently more expensive to produce than JP-8 because there are not enough customers buying in bulk to reach the economy of scale that would lower the price. Johns, again: “I don’t know that we can drive the commercial enterprise.”

I have news: Economy of scale is not the problem. An unimaginably huge demand already exists. The entire modern world is waiting for a suitable low-cost alternative to petroleum. The automobile industry, the transportation industry (truck, rail, ship), aviation industry, heating industry, electric power-and-light industry, road construction industry, petrochemical industry, manufacturing industry, mining industry, on and on, all are anxiously awaiting its availability. And countless entrepreneurs are working on it. And when they begin to deliver, the market will rush to purchase all that it can.

Only government bureaucracy thinks that the path to success is to pick and choose the winners ahead of time and throw money at the problems. After all, it’s not their money; they’ll just tax more. Ignored is how that will undermine the market competition and shatter any chances of real progress.
Chester A. Kojro
Rolla, MO

Topics: Defense Department, DOD Policy

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