This entry is a subentry of Procurement.
In the United States after World War II, a military‐industrial complex developed, quite unlike its counterparts in other advanced industrial countries. A distinctive set of firms in a select set of industries emerged as dominant suppliers to the Pentagon, and in turn were beneficiaries of a de facto industrial policy. During World War II, the Pentagon appropriated the strongly centralized and strategically planned New Deal state apparatus, creating a permanent security state that endured throughout and even beyond the Cold War. Traditional “hot war” suppliers such as the auto and machinery industries turned their sights back on commercial markets following the war, but the newly expanded aircraft, communications, and electronics (ACE) industries remained dependent upon military markets for both research monies and sales.
The ACE complex centered on a set of firms that subsequently climbed the ranks of the Fortune 500 biggest corporations—aerospace companies like Grumman, Rockwell, Northrop, General Dynamics, and Lockheed, and communications/electronics firms like Hughes, TRW, and Raytheon. Boeing, successful in both commercial and military markets, was an exception. As commercial shipbuilding declined, shipyards like Newport News, Bath Iron Works, Litton, and Todd also became increasingly defense‐dedicated. In a market that operated as a bilateral monopoly (defined as one buyer and one seller, each dominating its “side of the market”), these firms flourished under military patronage and were kept afloat by “follow‐on” procurement practices. Pentagon oversight practices generated a specialized business culture that stressed high performance and timeliness over cost‐consciousness, rendering military contractors increasingly ill‐equipped to compete for commercial sales.
During the early postwar period, advances in jet engines, navigation and guidance systems, and new forms of rocket propulsion yielded significant technologies for the commercial sector, giving American aircraft, communications, and electronics industries a head start in international competition. Through the end of the century, U.S. net exports remained dominated by these sectors plus arms and agricultural goods. Increasingly, however, the esoteric nature and exorbitant cost of military requirements curtailed spin‐off, while commercially oriented economies like Japan and Germany were able to capitalize on U.S. defense‐underwritten inventions in electronics, robots, and computers.
In the past few years, scholars have begun to question the contribution of the Cold War military‐industrial effort to the American economy. Consuming more than $4 trillion since the 1950s, on average 5 percent and 7 percent of GNP annually, much of it deficit‐financed, the military‐ industrial complex has siphoned off a large portion of the nation's scientific and engineering talent and its capital investment funds. The relatively poor postwar performance of American auto, metals, machinery, and consumer electronics industries can be attributed in part to this relative starvation of resources and the absence of similar industrial incentives.
Its costliness has been exacerbated by the spatial segregation of much of the complex from the traditional industrial heartland, inhibiting cross‐fertilization and requiring new public infrastructure in “Gunbelt” cities and areas such as Los Angeles, San Diego, Silicon Valley, Seattle, Colorado Springs, Albuquerque, and Huntsville. The dependency of these firms, industries, and regions on the Pentagon budget has made it more difficult to adjust to post–Cold War realities, especially with associated geopolitical shifts in political representation.
[See also Consultants; Economy and War; Industry and War.]
Bibliography
- Merton J. Peck and Frederick W. Scherer, The Weapons Acquisition Process, 1962.
- Seymour Melman, The Permanent War Economy: American Capitalism in Decline, 1974.
- Gregory Hooks, Creating the Military‐Industrial Complex, 1992.
- Ann Markusen and Joel Yudken, Dismantling the Cold War Economy, 1992
