Defense Technology: The Payoffs for Economic and Military Security

Historically, this Nation's policies to support the development of advanced industrial technology were motivated primarily by national security concerns. This linkage traces back to post-Revolutionary times, when the government spurred the development of an interchangeable parts approach to manufacturing to meet a pressing need for rifles. The government's impact on manufacturing was significant then and it remained so, at least until recently.

During and after World War II, new high-technology industries were driven and assisted by the government's push to strengthen national security. Defense programs dominated the Federal Government's R&D portfolio. The payoffs were substantial, with U.S. industry benefiting from defense-driven investments.

But an increasingly inflexible defense acquisition process lengthened production cycles and increased costs at the same time that commercial enterprises began the drive to reduce costs and time to market. Defense systems' development needs and benefits diverged from the industrial main- stream, which was spurred by stiff overseas competition and dramatic tech- nology advances.

Today, though defense continues to blaze the trail in key areas of leading-edge research, the rate at which that innovation is actually moved into production often lags well behind that of commercial industry in important sectors such as computers and microelectronics.

Three Pillars of a 21st-Century Defense Technology Strategy

The Clinton Administration intends to reverse this trend and will pursue more efficient and effective strategies for defense investments in technology. The three pillars that will serve as the foundation for a 21st-century defense technology strategy are:

These strategic thrusts are beginning to redirect this Nation's massive defense investment so that it is both more effective and more supportive of our broader industrial base.

Reform the current DOD acquisition process to encourage the use of commercial processes and products within defense systems. By using compo- nents, technologies, and subsystems developed by commercial industry when- ever possible, defense should be able to attain three compatible objectives:

Focus more R&D within DOD on dual-use products and processes, emphasizing affordable advances in high-tech defense systems. Investments in technologies that are both critical to defense systems and vital to commercial industries serve a dual use.

Dual-use technologies include manufacturing processes as well as products. For example, the Microelectronics Manufacturing Science and Tech- nology (MMST) Program supported by DOD was designed to develop fast, flexible, cost-effective techniques for manufacturing semiconductors. The primary goal was to meet military needs for relatively small batches of semi- conductors at affordable cost, but the technology is valuable to commercial production as well. In fact, it was developed in partnership with the commer- cial division of Texas Instruments.

Reach out globally to our allies, to benefit from international cooper- ation on a technology-by-technology basis. Technology today is global, flowing with relative freedom across national boundaries. We need to ensure that the flow of defense technology-related knowledge is not just one way. In the recent past, we have shared considerable expertise and technology with our allies. A part of our strategy now must be to strengthen our relationships with allies and explore how they may be helpful to us in solving technology-based problems.

Progress to Date

The Administration has taken concrete steps to implement its new vision for a defense strategy, which makes the most of our national investment in technology by supporting both military and economic strength:

A dual-use strategy as discussed above offers clear advantages to the military. Defense planners know that the way to get the most out of shrinking dollars is to buy as much as possible from commercial manufacturers who, under the discipline of the market, must give their customers good value high quality, reliable products embodying the latest and best tech- nologies at competitive prices. While the dual-use approach is not as central to the interests of commercial companies, they too will benefit. Defense spending for dual-use R&D and procurement has a more than proportionate effect on advancement of technology, because investments will be heavily weighted to leading-edge technologies with potentially broad application.

Nevertheless, defense spending makes up a small and declining share of a $5.5 trillion to $6 trillion economy. Civil-military integration is just one part, though an important part, of successful conversion to a post-Cold War economy. The best and broadest conversion strategy must also include govern- ment investments that lift the performance of the whole economy. This means:

Other sections of this progress report deal with these broader strategies for transition to a post-Cold War world.

Energy and Environment: New Technologies for Growth