Defense Conversion: Bulldozing the Management

The record of massive defense conversion is one unblemished by success, with two notable exceptions: the defense-dominated economies and mammoth military facilities of Japan and Germany, which were converted into civilian production after World War II. Then, the two defeated powers were militarily occupied, their defense industries were immediately destroyed and rebuilt with extensive foreign aid; now, decades later, both countries enjoy economic prosperity.

Similar solutions are being proposed today for the former Warsaw Pact nations, using Western bulldozers rather than Allied tanks, since true defense conversion is readily dismissed as impossible or at least impracticable. There are sound grounds for such dismissal. In our travels throughout the onetime communist countries—talking to plant managers, workers, academics and government officials alike—we came to sense the staggering obstacles they confront. The greater these obstacles appeared relative to anything known in the West, where defense conversion has largely failed, the darker their prospects seemed. And where the need is greatest, in the former Soviet Union, the impediments are greatest and the trends most pernicious.

Something needs to be done. On that almost everyone concurs. On exactly what, almost everyone seems to differ. We offer our views from a rather unique perspective among analysts of this topic, since one of us has actually had to operate and alter defense production plants over the years.

II

Defense conversion in the United States has been bedeviled by two conflicting objectives: how to shift firms out of defense and into civilian pursuits, and how to preserve a mobilization base to meet conceivable future defense needs.

Twenty-six years ago an Arms Control and Disarmament Agency report examined attempts at commercial diversification by U.S. defense firms. It found "a discouraging history of failure." Two years ago ACDA reexamined the same issue and came to the same conclusion: "Successful examples of such conversion are difficult to find. Detailed research has not identified a successful product in our economy today which was developed through a military-to-civilian conversion approach. . . . As of 1990 there are very few concrete examples of actual conversion."