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Pentagon Not Ready for Global Defense Industry, Says New Council on Foreign Relations Book

August 10, 1999
Council on Foreign Relations

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August 10, 1999, New York City—The end of the Cold War created a crisis for the American military industrial complex, as procurement spending dropped by over 60% in a decade and the export market imploded. In Arming the Future: A Defense Industry for the Twenty-First Century, a group of policymakers, industry watchers, and scholars dissect the upheavals of the 1990s, especially the rash of mergers that reduced the defense industry to a few major players. As companies vacillated between diversification and military specialization, the Pentagon encouraged mergers and liberalized arms exports, undercutting defense conversion.

These policies, plus procurement reform and dual-use technology initiatives, receive mixed reviews in Arming the Future. While unexpectedly profitable, the defense industry is now more concentrated, raising questions about future weapons cost and innovation. Its enhanced political power may distort national spending, military policy, and even national security, especially if export competition prompts an arms race among allies.

Looking ahead to imminent transnational mergers and partnerships, Senior Fellow Ann Markusen and Columbia International Affairs Online Editor Sean Costigan, the book's editors, warn that the Pentagon will lose market power in such a world. More, rather than less, oversight will be required. They caution against the current fad for privatization and counsel cooperation with European and other allies in rationalizing defense industrial capacity. Furthermore, the book points out, a number of initiatives are promising, including investment in military industrial expertise in the Pentagon, vigilance and restraint in arms exports, competition-enhancing procurement practices, and policy incentives favoring firm diversification, and lowered defense dependency.

The Council on Foreign Relations, founded in 1921 and based in New York, is a national nonpartisan membership organization and think tank dedicated to fostering America’s understanding of other nations through study and debate.