Industrial Base Gears Up for Great Power Conflict.

Author:Green, Jeffery A.

For decades, free-trade ideology has dominated discussions about manufacturing and economic development in the United States, even with respect to the defense industrial base. Though policies stemming from this ideology have succeeded in generating great wealth for the U.S. economy, they have also led to a number of unintended consequences, including the erosion of the manufacturing segment of the defense industrial base.

With new authorities included in this year's defense authorization bill, however, the Pentagon is well-equipped to reverse the decline in U.S. defense manufacturing and to provide secure supply of crucial military components for the future.

The Defense Department is, of course, unlike any private sector business. It is responsible for responding to unforeseen events worldwide and is also subject to threats and challenges that no private sector actor confronts.

A mistaken emphasis on free-trade ideology and a selective aversion to "picking winners and losers," however, has led to the false conclusion that the department, which has a budget larger than many midsize European countries, cannot and should not attempt to shape the commercial sector that supplies it. This mindset has produced weak points in the supply chain that potential adversaries have recognized and exploited.

A recent op-ed by retired Air Force Gen. Hawk Carlisle, former commander of Air Combat Command, and current president and CEO of the National Defense Industrial Association, argues that today's industrial base is vastly different than the one that propelled the United States to military greatness in World War II and throughout the Cold War. Even as defense spending increased following 9/11, the defense industrial base has continued to shrink and consolidate.

This process was greatly accelerated by budgetary uncertainty during the Obama administration. A study on the impacts of budget sequestration by the Center for Strategic and International Studies and the Aerospace Industries Association, "Measuring the Impact of Sequestration and the Defense Drawdown on the Industrial Base, 2011-2015," notes that over 17,000 companies left the defense industrial base during those years. This greatly reduced the scope of competition within the industry and left the defense supply chain with a large number of single points of failure.

Looking at U.S. industry more broadly, it is clear that while certain segments of manufacturing output are doing well, industries that...

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