[Marxism] Erosion of US Industrial Base Worries Military Planners

Calvin Broadbent calvinbroadbent at hotmail.com
Tue Nov 15 10:36:25 MST 2005


This is from America's right-wing *National Defense* Journal. Haha.

<http://www.nationaldefensemagazine.org/issues/2003/Aug/Erosion.htm>

August 2003

Erosion of U.S. Industrial Base Is Troubling

Growing dependence on foreign suppliers should concern policy makers

by Sheila R. Ronis

The U.S. industrial base is eroding, and this situation has enormous 
national security implications. It has made the United States so dependent 
on foreign countries for critical components and systems that it may have 
lost its ability to control its supply chains.

The United States is becoming dependent on countries such as China, India, 
Russia, France and Germany for critical weapons technology. It’s conceivable 
that one of these governments could tell its local suppliers not to sell 
critical components to the United States because they do not agree with U.S. 
foreign policy.

The federal government, and in particular, the Department of Defense, does 
not manage the country’s industrial base as a “system.”

U.S. government agencies are fiefdoms that rarely compare notes to see how 
their collective policies might affect a company or an industry. Interagency 
cooperation is an essential element of what needs to change in the future.

A Defense Department report entitled “Transforming the Defense Industrial 
Base: A Roadmap,” recommended the department consider “viewing the 
industrial base as being composed of operational effects-based sectors that 
support transformational war-fighting. … Organizing its decision processes 
to optimize operational effects—not programs, platforms or weapons systems.”

This report makes sensible arguments, but more needs to be done.

U.S. corporations increasingly act as large social systems with a global 
focus. But ask the CEOs of the Fortune 500 to describe the issues on their 
minds and, more than likely, national security or the disintegration of the 
U.S. industrial base would not be among them. Many global corporations do 
not believe they owe allegiance to any stakeholder except their 
stockholders, and sometimes, their customers.

This attitude has not changed since the end of the Cold War—not even since 
9/11. A new vision of national security is needed that includes cooperation 
between government and industry.

National security requires a healthy market-based economy, with a strong 
industrial base of globally competitive industries continuously improving 
quality and productivity.

The United States cannot sustain the kind of growth it has enjoyed for the 
last several decades if the industrial base steadily erodes. Increasingly, a 
number of U.S. companies in specific industries find it impossible to 
compete in world markets. This is of particular concern for the industrial 
base that supplies the U.S. military.

According to U.S. Census Bureau data from 1992 to 1996, the domestic market 
share of military and civilian aircraft combined (traditionally an American 
manufacturing powerhouse) dropped from 88.5 percent to 86.6 percent. 
Aircraft engines and engine parts suffered a steeper decline—from 70.9 
percent to 63.2 percent. And domestic producers’ share of the non-engine 
aircraft parts market plummeted all the way from 80.5 percent to 68.5 
percent, said industrial base expert Alan Tonelson of the U.S. Business and 
Industry Council, quoting census data.

Much of the high-value American industry experienced the same deterioration 
from 1992 to 1996, according to Tonelson.

Domestic market share for relays and industrial controls dropped from 81.1 
percent to 75.1 percent, for computer storage devices from 39.3 percent to 
31.9 percent, for analytical instruments from 78.5 percent to 75.6 percent, 
for metal-cutting machine tools from 55.2 percent to 47.9 percent, for 
specialized industrial machinery from 85.2 percent to 82.7 percent, for 
pharmaceuticals from 95.7 percent to 93.1 percent and for industrial 
inorganic chemicals from 68.2 percent to 60 percent.

Data for the 1997-2001 period shows further weakening in domestic 
manufacturing. But the rate of deterioration was rarely faster than from 
1992 to 1996, as the weak-dollar advocates have been claiming. Precise 
comparisons between these periods are difficult because in 1997, the 
government changed a key system for classifying industries. Nonetheless, 
1997-2001 data for 80 out of 90 industries show market share losses during 
these years, Tonelson said.

Of note to the military defense sector, from 1997-2001, civilian jetliners 
fell from an 84.7 percent domestic market share down to 73.9 percent; 
aircraft engines and engine parts, from 60 percent to 50.7 percent, and 
non-engine aircraft parts, from 68.9 percent to 64.6 percent.

Falling domestic market share during the late 1990s afflicted many other 
core industrial sectors as well.

Market share for domestic producers of relays and industrial controls 
dropped from 70 percent to 60.5 percent, metal-cutting machine tools from 
41.5 percent to 37 percent, ball and roller bearings from 77.4 percent to 
75.8 percent, mechanical power transmission equipment from 75.1 percent to 
72 percent, turbines and turbine generator sets from 74.4 to 57.7 percent, 
pharmaceuticals from 90.5 to 85.9 percent, and plastics and resins from 88.9 
percent to 85.4 percent,Tonelson said.

Globalization and the intense pressure applied by Wall Street to U.S. 
companies encourages indiscriminant cost cutting, a measure that frequently 
works in the short term, but often creates losses in the long term.

The “better, faster, cheaper” mentality sometimes sacrifices long-term gains 
by forcing a company to outsource work to low-wage countries in the near 
term. These decisions can come back to haunt a company. This is especially 
the case when the work acquired is of inferior quality, or the accessibility 
of an essential item can be put in jeopardy.

In many cases, the United States is unable to manufacture critical military 
equipment. This situation is not officially documented and monitored, but it 
needs to be.

The United States does not have control over foreign shipping. Enemies can 
easily disrupt the economy just by sinking ships that feed the industrial 
base and consumer culture. The United States is vulnerable because of its 
dependence on foreign parts, services and fuel to maintain economic growth, 
not to mention military capability.

Global purchasing organizations in industry and the military are not 
sufficiently looking at the risks of potential disruption of supply lines. 
They tend to be rewarded for getting commodities less expensively, and 
nothing else.

In a global economy, the rules of engagement are different. Just look at the 
results of the brief longshoremen’s strike last year on the West Coast and 
the billions of dollars it cost the nation.

The Defense Department’s Diminishing Manufacturing Sources and Material 
Shortages (DMSMS) program, monitors spare part shortages regardless of 
cause.

DMSMS is the loss or impending loss of manufacturers or suppliers of 
critical items and raw materials due to production discontinuance. DMSMS can 
be caused by rapid changes in item or material technology, uneconomical 
production requirements, foreign source competition, federal environmental 
or safety requirements, and limited availability or increasing cost of items 
and raw materials used in the manufacturing process.

The problem is further complicated by a reduction in the industrial base 
dedicated to production of military equipment. In fact, the Defense 
Department now accounts for less than one-half of 1 percent of total 
microelectronic component sales. In addition, aging fleets of ships and 
aircraft have lost their original supplier-base of constituent mechanical, 
hydraulic and other components.

The DMSMS database is an example of how badly the industrial base is 
deteriorating.

The Industrial College of the Armed Forces at National Defense University 
has an industry studies program that annually examines 20 industries 
representing key components of national security. ICAF’s work has chronicled 
the deterioration in industries such as advanced manufacturing and shipping.

Manufacturing
When government R&D investment in an industry deteriorates, it is only a 
matter of time before an industry is in trouble. Manufacturing R&D by the 
federal government is declining.

According to Manufacturing News, “in the mid 1990s, the government was 
spending $1.5 billion on manufacturing related R&D, including such programs 
as Technologies Enabling Agile Manufacturing at the Energy Department and 
$500 million in electronics manufacturing programs at DARPA. Both of those 
programs have been discontinued.”

In the same article, d*ck Engwall, the 2002 recipient of the 
multi-association “Individual Manufacturing Excellence Award,” said he is 
“concerned about the military’s desire to abandon programs related to 
materials, processes and affordability.”

Shipbuilding and Repair
In May 2001, the U.S. Department of Commerce’s Office of Strategic 
Industries and Economic Security, in partnership with the Carderock Division 
of the Naval Surface Warfare Center, completed a three-year national 
security assessment of the U.S. shipbuilding and repair industry. Some of 
the findings were disconcerting.

According to the study, employment in the industry has “dropped sharply 
since the early 1980s, when total private employment was close to 180,000 
workers. Survey estimates indicated that employment would decline to about 
83,500 in 2000.” In addition, “orders for U.S. warships have declined 60 
percent during the 10 years since the end of the Cold War.”

Young people no longer view working in a shipyard as a viable way to make a 
living. Consequently, according to DOC, “survey responses indicate that 
labor shortages have reduced profits, impacted construction costs, and 
delayed project completion for most shipyards.”

According to the study, the basis for U.S. ship-building superiority has 
been the research and development expertise that currently resides in Navy’s 
laboratories, acquisition commands, and certain shipbuilders and 
universities. “Collectively, these organizations have conceived and designed 
most of the state-of-the-art hull, mechanical, electrical, power projection, 
air defense and undersea warfare capabilities that are operational today. 
With reduced research and development budgets, some of that capability now 
is becoming fragmented.”

This situation also exists in other industries, such as machine tools, the 
high performance explosives and explosive components industry, cartridge and 
propellant actuated device sector and welding. nd

Sheila Ronis, Ph.D., is president of The University Group Inc., in 
Birmingham, Mich.

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