MILITARY-INDUSTRIAL COMPLEX

MILITARY-INDUSTRIAL COMPLEX. The term "military-industrial complex" (MIC) was coined by President Dwight D. Eisenhower in his farewell address of 1961. Great and sustained spending for defense and war, he warned, created power groups that could disastrously harm the nation's future. He was referring to the years after 1950 when Cold War military and related budgets reached as high as 10 percent of the gross national product (GNP). Agitation against the MIC became most intense in the 1960s and 1970s as protest against the Vietnam War peaked. The term began to fade in usage during the 1980s, despite huge increases in the armed forces' budgets under the presidency of Ronald Reagan. Even though at the beginning of the twenty-first century the military continued to be comparatively large and expensive—totaling around 3 percent of the GNP—its size and influence was no longer the matter of great controversy that it was in the past.

MIC Theory

According to MIC theorists, prolonged international conflict after World War II produced high levels of military expenditure, creating powerful domestic interest groups that required a Cold War ideology to safeguard their power and prestige with in the state's political and economic structure. These interest groups, which arose among the military services, corporations, high government officials, members of Congress, labor unions, scientists and scholars, and defense societies (private organizations that combine industrialists, financiers, and business people involved in weapons production, acquisition, and the like and members of the armed forces), came to occupy powerful positions with in the state. They became mutually supportive, and, on defense-related matters, their influence exceeded that of any existing countervailing coalitions or interests. Theorists differed over whether civilians or the military dominated a MIC or whether they shared power. But most agreed that civilians could match and even surpass those in uniform in their dedication to military creeds. Most scholars pointed out that MIC operations constituted military Keynesianism, a means of stimulating the economy; others went further, proposing defense spending as an industrial policy, albeit a limited and economically distorting one. Some critics of vast and continued spending on the armed forces worried that military professionalism was under-mined by focusing inordinate attention on institutional growth and the advancement of careers instead of defending the nation.

Since most MIC theorists regarded Cold War ideology as either false or exaggerated, they maintained that its adherents either deliberately engaged in deception in order to further their own interests or falsely believed themselves to be acting in broader public or national interests—or some combination of the two. Whatever the case, proponents of arms without end, so-called hawks, served to perpetuate Cold War ideological strains. The close connection between the MIC and U.S. Cold War ideology not with standing, some MIC theorists maintained that capitalism had no monopoly on defense and war complexes. The former Soviet Union, they argued, had its own complex, and the U.S. and Soviet MICs interacted to perpetuate a mutually advantageous but in fact enormously dangerous and ultimately destructive state of heightened competition.

Opponents of MIC theory insisted that arms spending genuinely reflected, rather than in any way created, national security threats. The armed services and their weapons were essential, they argued, for deterring formidable and aggressive foes. Most analysts, however, believed that an accurate assessment of a MIC rests somewhere between the assessments of proponents and critics of MIC theory. Such a viewpoint asserted that, while national defense spending and the industrial and political interests associated with it can exacerbate tensions between the United States and its adversaries, they do not themselves cause these tensions, nor do they prevent their resolution. It is likely that much of the general population subscribed to this more measured view.

Historical Background

Cold War–era debate over a MIC actually obscured understanding of a critical subject by removing it from its proper historical context. Military spending has created special problems since the nation's origins. Vested interests made it exceptionally difficult to close down, consolidate, or move military and naval bases. Too often, national defense and armed forces' welfare were subordinated to economic and political purposes. These corrupting forces were kept under control principally by limiting—often drastically so—military expenditures during peacetime. Special circumstances began to alter that pattern at the end of the nineteenth century. As the United States began expanding abroad, it built a new navy starting in the 1880s of steel, steam, propeller, armor, and modern ordnance. To build this navy required assembling a production team of political leaders, naval officers, and industrialists. Here are to be found the origins of a MIC. Such teams, which continued to exist at the beginning of the twenty-first century, grew out of the need to apply modern science and technology to weaponry on a continuing basis. Private and public production teams were particularly important in the development and growth of aircraft between the two world wars and aerospace in the post–World War II period. And scientists, of course, were indispensable in nearly all nuclear developments.

During World War I, the United States had to plan its economy to meet the massive and increasingly sophisticated supply demands of the armed services. That reality revealed the country's unique and complicated civil–military relations. Emergency conditions led private interests to combine their power with that of the military in order to influence, and even shape, national defense and war policies. In the absence of a higher civil service system, it fell upon business people, professionals, and others to devise methods of harnessing the economy for war. The ultimate result was the creation of the War Industries Board (WIB) in 1917. The board was staffed and directed largely by private industrialists serving the public for a token salary, while remaining on the payroll of their private firms. Organizing the supply side of economic mobilization, WIB could function properly only after the demand side, and especially the armed services, were integrated into it. Fearful of and unwilling to accept their dependence upon civilian institutions for the fulfillment of the military mission, the armed services resisted joining WIB. They did so only when threatened with losing control of supply operations entirely. Once industrial and military elements joined their operations in WIB, the board was able to maintain stable economic conditions in a planned wartime economy.

Concerned about the military disruption of future economics of warfare, Congress in 1920 authorized the War Department to plan for procurement and economic mobilization. Carrying out these responsibilities with the Navy Department and under the guidance of industry, business, and finance, the army wrote and submitted for public review a series of industrial mobilization plans, the last and most important of which was published in 1939. Based principally on WIB, this plan outlined how the economy would be organized for World War II.

The economics of World War II, however, became intensely controversial. Interwar developments had anticipated this controversy over the formalized alliance between the military and industrial interests. Throughout the 1920s and 1930s, and culminating in the Senate Special Committee Investigating the Munitions Industry (Nye Committee) in 1934–1936, antiwar critics insisted that modern warfare was creating an "unhealthy alliance" between economic and military groups that threatened both the peace and the country's economic future. During World War II, New Dealers, organized labor, small businesses, consumer advocates, and others constantly challenged the War Production Board (WPB), which, like its predecessors, was dominated by a conservative coalition made up principally of corporations and the military. These challenges met with little success, although they managed to make war mobilization exceptionally tumultuous. Overall, however, conservative mobilization patterns and wartime prosperity severely weakened New Deal reform instincts.

MIC in Operation

Except in the aircraft, shipbuilding, and machine tool industries, businessmen after World War II favored a return to the familiar American pattern of reducing military spending to minimal levels. Only after the administration of Harry Truman (1945–1953) developed its Cold War containment polices did Department of Defense (DOD) budgets, which had been declining steadily since 1945, begin dramatically rising in 1950. In the context of military expenditures running into the hundreds of billions of dollars, there emerged patterns associated with a full-blown MIC: defense firms such as Lockheed Aircraft Corporation wholly or significantly dependent upon DOD contracts; armed services committed to weapons systems in which military careers are at stake; states like California heavily tied to military spending; "think tanks" such as the Rand Corporation and university research projects funded by the DOD; a high percentage of scientific and engineering talent and research and development dollars devoted to weaponry; industrial executives and military officers circulating among government posts, defense contractors, and related institutions; charges of massive waste, duplication, cost overruns, useless and malfunctioning weapons, some so far as to be dangerous to their users; all while funding for health, education, welfare, and other civilian needs suffered by comparison. Nuclear weapons capable of destroying civilization and creating enormous problems of waste disposal and pollution greatly complicated all MIC problems. So, too, did the fact that the United States emerged as the world's principal exporter of arms, ranging from the simplest to the most sophisticated, and extended its reach throughout the globe. All of these trends raised grave problems for and led to intense disputes about the free flow of scientific information, academic freedom, and matters of loyalty, security, and secrecy in a democratic society.

Although the Cold War ended, numerous experts insisted that the United States did not realistically adjust its defense mission accordingly; strong and entrenched interests tenaciously resist change. Hence, a relatively large military establishment and a vast nuclear arsenal continued to exist to cover the remote possibility of fighting two major regional wars simultaneously, while also engaging in peacemaking. At the same time, the United States pursued highly questionable antimissile defense systems that could end up costing trillions of dollars. Although the issue is no longer headline news, many contended that a military-industrial complex still existed, even thrived, despite the much less hospitable circumstances.

BIBLIOGRAPHY

Greider, William. Fortress America: The American Military and the Consequences of Peace. New York: Public Affairs, 1998.

Koistinen, Paul A. C. The Military-Industrial Complex: A Historical Perspective. New York: Praeger, 1980.

Lowen, Rebecca S. Creating the Cold War University: The Transformation of Stanford. Berkeley: University of California Press, 1997.

Markusen, Ann, and Joel Yudken. Dismantling the Cold War Economy. New York: Basic Books, 1992.

McNaugher, Thomas L. New Weapons, Old Politics: America's Military Procurement Muddle. Washington, D.C.: Brookings Institution, 1989.

Schwartz, Stephen I., ed. Atomic Audit: The Costs and Consequences of U.S. Nuclear Weapons Since 1940. Washington, D.C.: Brookings Institution, 1998.

Waddell, Brian. The War against the New Deal: World War II and American Democracy. DeKalb: Northern Illinois University Press, 2001.

Paul A. C.Koistinen

See alsoArms Race and Disarmament ; Defense, National ; andvol. 9:Eisenhower's Farewell Address .

The Term Military‐Industrial Complex has a clearly defined history. It was first used by President Dwight D. Eisenhower in his farewell address in January 1961, when he warned that “In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military‐industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.”

The term soon came into widespread use because it seemed to fit and explain some of the new military realities of the time: the persistent high military spending in peacetime, which was unprecedented in American history; the persistent and costly arms race between the United States and the Soviet Union; and the persistent and seemingly pointless U.S. military involvement in Vietnam. The 1960s–1970s saw a flood of writings about the military‐industrial complex, a flood that crested during the last years of the Vietnam War. By the mid‐1980s, however, the term had largely fallen out of public discussion.

Whatever the ebb and flow of language, the concept reflects an enduring reality. Since the beginning of the Industrial Revolution in the late eighteenth century, every great power has demonstrated a close connection between its military and its industry. Industrial development led to military advantage (e.g., the British steel industry and the Royal Navy) and military needs led to industrial development (e.g., the German Army and the German steel industry).

This military‐industrial connection existed even in the commercial United States. Eli Whitney developed the mass‐production process in 1798 while seeking a better way to manufacture U.S. Army muskets. For a century and a half thereafter, the U.S. government arsenal system was a military‐industrial complex of the clearest and simplest sort.

The arsenal system was not the most common pattern of military‐industrial relations in the United States, however. Normally, commercial demands first called an industry into being, and then the U.S. military, following the lead of the militaries of other great powers, applied the products of the new industry to military purposes. The expanding American steel industry after the Civil War soon found a market in the new steel‐hulled U.S. Navy, but its major markets remained civilian. The next waves of American industry—successively the chemical, electrical, and automobile industries—also developed because of civilian, not military, demand.

Beginning in the 1930s and continuing through World War II and the Cold War, this pattern of civilian production leading military production was reversed. The next waves of American industry—aviation (later aerospace), computers, and semiconductors—were brought into being by military demand, and their products only later found civilian applications.

Two world wars reinforced the connection between the military and industry. In both wars, the largest defense contractors were the largest industrial corporations (in World War II, these included U.S. Steel, Bethlehem Steel, Dupont, General Electric, Westinghouse, General Motors, and Ford). However, when these wars were over (as after all previous U.S. wars), these American corporations quickly converted from production for military purposes back to production for commercial markets. With the minor exceptions of the U.S. government arsenals and shipyards, the military‐industrial complex in the United States was a reality only in wartime.

A new kind of military‐industrial complex came into being in the 1950s. The comprehensive national strategy presented in National Security Council memorandum No. 68, a call for Cold War, rearmament, seemed to legitimate, and the experience of the Korean War seemed to necessitate, a permanent military‐industrial establishment, in peacetime as well as in wartime or at least in cold as well as hot war. After the Korean War, the Eisenhower administration did not undertake drastic reductions in military spending like the reductions after previous wars but rather maintained military spending at the level of about 10 percent of GNP. Much of this spending went for the procurement of weapons systems, especially aircraft and missiles. Moreover, several large corporations, particularly those in the aerospace industry, became completely dependent upon military contracts (e.g., Lockheed, General Dynamics, North American, McDonnell, and Grumman). Eisenhower himself presided over the institutionalization of the military‐industrial complex that he would later warn against.

Many of the major military contractors were clustered in California and Texas. This concentration within particular states and congressional districts meant that their representatives in Congress became representatives of the contractors and of the military‐industrial complex more generally. These representatives often became members of the House and Senate armed services committees, where they heavily influenced military procurement. The military‐industrial complex thus developed into the “iron triangle,” composed of congressional committees, military services, and military contractors.

During the two decades of the greatest public discussion about the military‐industrial complex in 1960–80, several arguments were put forward about its consequences for public policy:

Military Keynesianism.

Some analysts argued that the military‐industrial complex promoted military spending as the way to use fiscal policy to manage the national economy, a military version of the macroeconomic prescriptions of John Maynard Keynes. This led to persistent and massive federal budget deficits.

The Depleted Society.

A related argument was that the military‐industrial complex diverted resources from investment in long‐run economic and social development into spending on nonproductive military weapons, depleting society instead of developing it. In particular, there were too many engineers devoted to developing military products and not enough developing commercial ones. This seemed to explain why Japan and Germany, which had much lower military spending per capita than the United States, were more successful in international commercial markets. This led to persistent and massive U.S. trade deficits.

The Follow‐on System.

It was also argued that, in order to preserve particular military contractors and their production facilities, the military‐industrial complex promoted weapons systems that were merely new variations or “follow‐ons” of previous systems from a particular production line. This led to a sort of technological stagnation.

The Gold‐plating Syndrome.

A related argument was that, in order to maintain the profits of military contractors, the military‐industrial complex promoted excessive spending on superfluous features of weapons systems, often referred to as “waste, fraud, and abuse.” This led to fewer numbers of more expensive weapons.

Each of these arguments was highly controversial when first made. This is not surprising, given the high stakes in military expenditures that were involved. By now, however, most analysts of military procurement agree that there is substantial evidence supporting each as they apply to much of the period from the 1960s to the 1980s.

It was also argued, especially at the height of the Vietnam War, that the military‐industrial complex put strong and persistent pressure on U.S. leaders to undertake military interventions and an adventurous foreign policy. Yet the evidence is largely against this argument. The U.S. military services, at least the army and the Marines, have consistently been reluctant to undertake military interventions. The military services generally have been in favor of the procurement of new weapons, but not the employment of them.

Whatever the power of arguments about the influence of the military‐industrial complex on weapons procurement during the Cold War, they are much less relevant to the current era. The end of the Cold War and the fiscal constraints imposed by federal budget deficits brought an end to military Keynesianism. American society is certainly depleted in many ways, but its current problems do not include too little investment and too few engineers for commercial products. The follow‐on system is less evident, since a major defense contractor (Grumman) was allowed to go out of business, and other production lines have shrunk greatly. There is still ample gold‐plating—waste, fraud, and abuse—but it can now be seen as a sort of welfare system (like public works during the Great Depression) for a limited number of distressed localities.

A military‐industrial complex still exists, but it is now a much smaller part of the U.S. economy than it was during most of the Cold War (military spending in the late 1990s is less than 3% of GNP). Because of this relatively small size, the military‐industrial complex no longer seems to have consequences that are really damaging to American interests. The major problems now seem to arise from other complexes—perhaps the financial, medical, educational, or entertainment complexes—and from the complexity of America itself.
[See also Consultants; Economy and War; Industry and War; Procurement; Weaponry.]

Bibliography

Mary Kaldor , The Baroque Arsenal, 1981.
Thomas L. McNaugher , New Weapons: Old Politics: America's Military Procurement Muddle, 1989.
Gregory Michael Hooks , Forging the Military‐Industrial Complex: World War II's Battle of the Potomac, 1991.
Ann Markusen et al. , The Rise of the Gunbelt: The Military Remapping of Industrial America, 1991.
Jacob A. Vander Meulen , The Politics of Aircraft: Building an American Military Industry, 1991.
Ethan B. Kapstein , The Political Economy of National Security: A Global Perspective, 1992.
Ann Markusen and and Joel Yudken , Dismantling the Cold War Economy, 1992.
Raymond Vernon and Ethan B. Kapstein, editors, Defense and Dependence in a Global Economy, 1992.
John L. Bois , Buying for Armageddon: Business, Society, and Military Spending since the Cuban Missile Crisis, 1994.

James Kurth

Military-Industrial Complex

BIBLIOGRAPHY

In his January 17, 1961, farewell address to the nation, departing president Dwight D. Eisenhower warned his fellow Americans of what he termed the “military-industrial complex.” According to historian Stephen E. Ambrose, Malcolm Moos, a speechwriter for Eisenhower, invented the term when he helped the president prepare his speech. In the middle of his televised speech, Eisenhower stated, “In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.”

During his presidency from 1953 to 1961, Eisenhower was irritated and troubled by the increasingly strident demands of Democrats in Congress that he approve higher defense spending, especially for bomber planes, missiles, and nuclear submarines after the Soviets launched their Sputnik satellite in 1957. Eisenhower believed that these Democratic demands were politically motivated, fiscally irresponsible, and unnecessary for a strong national defense in the days of the cold war. Some of the most outspoken Democratic advocates of higher defense spending represented states that especially depended on defense spending for their economies. One of them was Senator Stuart Symington of Missouri, a state that included McDonnell-Douglas, a major airplane manufacturer. Symington unsuccessfully sought the Democratic presidential nomination of 1960. Another was Senator Henry “Scoop” Jackson of Washington, a state that included Boeing, an aerospace manufacturer. Both Symington and Jackson were seriously considered for the vice presidential nomination of 1960.

As the 1960 presidential campaign progressed, Eisenhower was angered by Democratic presidential nominee John F. Kennedy’s frequent contention that a “missile gap” existed to the advantage of the Soviet Union and that the Republican president had allowed this missile gap to develop. According to Kennedy’s rhetoric, the missile gap was the most serious example of how the United States had fallen dangerously behind the Soviet Union in the cold war struggle during the Eisenhower administration. For Eisenhower and his supporters, it was unfair and absurd that liberal Democrats implied that a Republican president who was a retired general was weak on defense and oblivious to the military threat of the Soviet Union. Actually, it was Eisenhower who had previously emphasized nuclear deterrence, commonly known as “a bigger bang for the buck,” as a way to reduce the size and expense of conventional military forces and the possibility of future “limited wars” like the Korean War.

The concept of a military-industrial complex was not commonly used until the late 1960s. By then, liberal and New Left opponents of the Vietnam War claimed that since World War II the United States had developed and become dependent on a warfare state, a permanent war economy, or a national security state. According to this perspective, both major political parties, every president, Congress, labor unions, corporations, Wall Street, the Pentagon, and elite research universities benefited from high defense spending and justified it by emphasizing militant anti-Communism in foreign policy, violating civil liberties in the name of national security, and supporting regular “limited wars” like those in Korea and Vietnam. These left-wing critics presented a more sinister, conspiratorial portrayal of the military-industrial complex than that conveyed by Eisenhower.

The idea of a military-industrial complex ruthlessly determined to permanently control American politics, government, economics, and foreign policy has also influenced American popular culture, especially political dramas in films and novels. In the novel and 1964 film Seven Days in May, an American president prepares to sign a nuclear disarmament treaty with the Soviet Union. After the economy plunges into a recession because of the expected drop in defense spending, the president becomes unpopular and controversial. A famous, right-wing general organizes a conspiracy to overthrow the president in order to reject the treaty. The 1991 film JFK, a fictional movie about John F. Kennedy’s assassination in 1963, implies that Vice President Lyndon B. Johnson conspired with the Central Intelligence Agency and the Joint Chiefs of Staff to assassinate Kennedy so that Johnson as the new president could expand the American military effort in Vietnam.

In analyzing sharp increases in defense spending during the presidency of Ronald W. Reagan (1981–1989), journalist Hedrick Smith explained the existence of “iron triangles.” For every new weapons system, such as the B-1 bomber and Divad anti-aircraft gun, there was a symbiotic, three-way relationship of Pentagon officials, defense contracts, and members of Congress who supported its development, authorization, and funding. Regardless of how excessively expensive, unnecessary, or ineffective a weapons system was, it was continued because of the economic, political, and career interests of the participants in each iron triangle.

The military-industrial complex perspective was updated and revived for the post–cold war era by critics and opponents of President George W. Bush’s foreign and defense policies in Afghanistan and Iraq. They claim that long before the terrorist attacks of September 11, 2001, the Bush administration was planning to invade Iraq and overthrow its dictator, Saddam Hussein, partially for the purpose of protecting American oil interests in the Middle East, and was seeking a pretext for doing this. They also contend that it was no coincidence that Halliburton and other corporations associated with Bush administration officials, especially Vice President Richard Cheney, received major government contracts in Bush’s global war on terrorism. These criticisms and perceptions of Bush’s foreign and defense policies based on the assumption of a military-industrial complex are evident in the documentaries Fahrenheit 9/11 (2004) and Why We Fight (2005). Like the fictional movie JFK, Why We Fight includes film footage of Eisenhower’s farewell address.

BIBLIOGRAPHY

Ambrose, Stephen E. 1990. Eisenhower: Soldier and President. New York: Simon and Schuster.

Higgs, Robert. 2005. Resurgence of the Warfare State: The Crisis Since 9/11. Oakland, CA: The Independent Institute.

Leebaert, Derek. 2002. The Fifty-Year Wound: The True Price of America’s Cold War Victory. Boston: Little, Brown.

Smith, Hedrick. 1988. The Power Game: How Washington Works. New York: Ballantine.

Sean J. Savage

THE MILITARY-INDUSTRIAL COMPLEX

No Profit in Peacetime

Cold-war politics dictated that the United States maintain a standing army, navy, and air force equipped with modern weapons. But no profit existed in making weapons during peacetime—even the purchases of the U.S. military proved too small to support many of the major defense companies. Manufacturers anticipated and planned for peacetime lulls in their production, but ultimately the government had to support defense contractors with constant new orders or subsidize them directly with cash payments. Reasoning that it never hurt to have state-of-the-art equipment, the government pursued the policy of continually developing and deploying new weapons systems. This policy also kept most of the major manufacturers' production lines primed in case of emergency. Near the end of his presidency, in 1961, Eisenhower cautioned Americans about the growth of this new sector of the economy, which he called the "military-industrial complex."

Missiles

Aircraft manufacturers such as Convair, Lockheed, and North American Aviation that were able to make the transition to missile production in the 1950s found a solid, if somewhat erratic, profit in defending the nation. In 1955 North American correctly anticipated significant gains in missile work and restructured into three divisions in order to meet the government's needs: Rocketdyne produced engines; Aeromatics produced guidance systems; and Atoms International produced warheads. Between 1956 and 1961 Convair's missile sales almost tripled, and Lockheed's nearly doubled. Aerospace manufacturers drew half their earnings from missiles and other defense-related production by the end of the decade.

The Gun Belt

This "defense boom" directly benefited the southwestern states and California, where most of the defense plants were located. Secluded desert areas and proximity to the Pacific Ocean made possible secret, safe testing of missiles and aircraft. The plants were also near such government research facilities as Edwards Air Force Base, the Western Development Division of the Air Research and Development Command, and the Ames Test Center. Clearly Texas, California, and the states between them—dubbed the "gun belt"—provided the most advantageous locations for defense contractors. East-coast aircraft manufacturers such as Grumman, Fairchild, and Curtiss-Wright were unable to keep up. Led by the growth of the defense industry, political and economic clout shifted somewhat by the end of the decade, from the Northeast to the South and Southwest.

Civilian Industry Benefits

The military-industrial complex also benefited nondefense industries by providing the basis for tremendous amounts of research and development (R&D) in the decade. Scholars still debate whether the computer or the jet passenger aircraft would have appeared when it did, without military R&D or subsidies. Inarguably, however, technology that had been designed for the military was also found to have civilian applications. The complex also benefited academic research: in 1956 Lockheed transferred its missile research division to Stanford University and built new labs at Palo Alto for military R&D.

A Strained Relationship

But the tight relationship between business and the military was still occasionally strained. In 1950, for example, the Defense Department's weapons-system-evaluation panels cleared the Convair B-36 bomber of charges that it was inadequate to U.S. needs, keeping intact an order for more than 60 of the bombers and saving hundreds of Convair jobs. Two years later the secretary of the air force announced a cut of 147 B-52s produced by Boeing, then suddenly reversed himself to order expanded production of the bomber. In 1953 Congress suggested that contractors and the armed forces conspired to pad the Defense Department's budget. A House government operations subcommittee headed by Rep. R. Walter Riehlman (R-New York) demanded that the military punish those responsible for spending $3 million on "useless" navy forklifts, $45 million for "unsuitable" army overcoats, and $1 million for unnecessary airforce chain-link fences. The subcommittee demanded that Secretary of Defense Charles E. Wilson explain his plan to end "costly and wasteful" service loyalties and correct other "deficiencies" harming the purchase and distribution of supplies. Appropriately or not, however, the government continued to spend growing amounts on defense: by the end of the decade defense spending stood at $46.4 billion, a 38 percent increase over 1949 levels.

THE RISE OF TRW

Military interservice rivalries had much to do with the shift of defense business from the frost belt to the sun belt. The U.S. Air Force, freed from army control by the late 1940s, was the beneficiary of the Strategic Missiles Evaluation Committee (the "Teapot Committee"), which in 1954 recommended a six-year crash program for R&D in ballistic missiles. It proposed that the air force lead the new effort, based on the West Coast at Western Development Division (WDD), which was created in 1954 and located in Inglewood (Los Angeles).

Meanwhile two engineers in the Howard Hughes aircraft organization, Simon Ramo and Dean Wooldridge, had built up a huge scientific and engineering organization within Hughes. At one time they oversaw the work of four hundred scientists. Ramo and Wooldridge left the Hughes operation in 1953, joining with a Cleveland aircraft-engine firm called Thompson Products. They were given the green light to form a new California-based company "to apply creative science and technology both to military and nonmilitary applications." Although only Ramo, Wooldridge, and two other employees opened the business during its first days, the company had 220 contracts and thousands of subcontractors. In 1958 Thompson merged with Remo-Wooldridge to form TRW, which produced everything from engine parts to famous racing pistons. But the primary defense work went to California.

Source:

"Teamwork Across 2,000 Miles," Business Week (29 November 1958): 52+.

Sources:

Roger W. Lotchin, Fortress California, 1910-1961: From Warfare to Welfare (New York: Oxford University Press, 1992);

Ann R. Markusen, The Rise of the Gunbelt: The Military Remapping of Industrial America (New York: Oxford University Press, 1991).

MILITARY-INDUSTRIAL COMPLEX

The Russian military industrial complex (voennopromyshlennyi kompleks, or VPK), recently renamed the defense industrial complex (oboronno-promyshlennyi kompleks, or OPK), encompasses the panoply of activities overseen by the Genshtab (General Staff), including the Ministry of Defense, uniformed military personnel, FSB (Federal Security Bureau) troops, border and paramilitary troops, the space program, defense research and regulatory agencies, infrastructural support affiliates, defense industrial organizations and production facilities, strategic material reserves, and an array of troop reserve, civil defense, espionage, and paramilitary activities. The complex is not a loose coalition of vested interests like the American military-industrial complex; it has a formal legal status, a well-developed administrative mechanism, and its own Web site. The Genshtab and the VPK have far more power than the American Joint Chiefs of Staff, the secretary of defense, or the patchwork of other defense-related organizations.

The OPK consists of seventeen hundred enterprises and organizations located in seventy-two regions, officially employing more than 2 million workers (more nearly 3.5 million), producing 27 percent of the nation's machinery, and absorbing 25 percent of its imports. Nineteen of these entities are "city building enterprises," defense industrial towns where the OPK is the sole employer. The total number of OPK enterprises and organizations has been constant for a decade, but some liberalization has been achieved in ownership and managerial autonomy. At the start of the post-communist epoch, the VPK was wholly state-owned. As of 2003, 43 percent of its holdings remains government-owned, 29 percent comprises mixed state-private stock companies, and 29 percent is fully privately owned. All serve the market in varying degrees, but retain a collective interest in promoting government patronage and can be quickly commandeered if state procurement orders revive.

Boris Yeltsin's government tried repeatedly to reform the VPK, as has Vladimir Putin's. The most recent proposal, vetted and signed by Prime Minister Mikhail Kasyanov in October 2001, calls for civilianizing some twelve hundred enterprises and institutions, stripping them of their military assets, including intellectual property, and transferring this capital to five hundred amalgamated entities called "system-building integrated structures." This rearrangement will increase the military focus of the OPK by divesting its civilian activities, beneficially reducing structural militarization, but will strengthen the defense lobby and augment state ownership. The program calls for the government to have controlling stock of the lead companies (design bureaus) of the "system-building integrated structures." This will be accomplished by arbitrarily valuing the state's intellectual property at 100 percent of the lead company's stock, a tactic that will terminate the traditional Soviet separation of design from production and create integrated entities capable of designing, producing, marketing (exporting), and servicing OPK products. State shares in non-lead companies will be put in trust with the design bureaus. The Kremlin intends to use ownership as its primary control instrument, keeping its requisitioning powers in the background, and minimizing budgetary subsidies at a time when state weapons-procurement programs are but a small fraction what they were in the Soviet past. Ilya Klebanov, former deputy prime minister, and now minister for industry, science, and technology, the architect of the OPK reform program, hopes in this way to reestablish state administrative governance over domestic military industrial activities, while creating new entities that can seize a larger share of the global arms market. It is premature to judge the outcome of this initiative, but history suggests that even if the VPK modernizes, it does not intend to fade away.

See also: kasyanov, mikhail mikhailovich; military-economic planning; military, soviet and post-soviet

bibliography

Epstein, David. (1990). "The Economic Cost of Soviet Security and Empire." In The Impoverished Superpower: Perestroika and the Soviet Military, ed. Henry Rowen and Charles Wolf, Jr. San Francisco: Institute for Contemporary Studies.

Gaddy, Clifford. (1966). The Price of the Past: Russia's Struggle with the Legacy of a Militarized Economy. Washington, DC: Brookings Institution Press.

Hill, Christopher. (2003). "Russia's Defense Spending." In Russia's Uncertain Future. Washington, DC: Joint Economic Committee.

Izyumov, Alexei; Kosals, Leonid; and Ryvkina, Rosalina. (2001). "Privatization of the Russian Defense Industry: Ownership and Control Issues." Post-Communist Economies 12:485–496.

Rosefielde, Steven. (2004). Progidal Superpower: Russia's Re-emerging Future. Cambridge, UK: Cambridge University Press.

Shlykov, Vitaly. (2002). "Russian Defense Industrial Complex After 9-11." Paper presented at the conference on "Russian Security Policy and the War on Terrorism," U.S. Naval Postgraduate School, Monterey, CA, June 4–5, 2002.

Steven Rosefielde

THE MILITARY-INDUSTRIAL COMPLEX

Containment

As World War II was winding down, the alliance between the Soviet Union and the United States, brought together by a common foe, was deteriorating. Tensions between the two nations had existed since the Russian Revolution of 1917, and within a few years after World War II the two powers were engaged in a cold war. Following the war, the Truman administration made containment the cornerstone of all American foreign policy toward the Soviet Union. The policy of containment was originally devised by George Kennan, chargé d'affaires at the American embassy in Moscow. He argued that the United States and the Soviet Union could not coexist because the Soviet Union was by its very nature expansionist. The goal of the United States, according to Kennan, should be to apply counterpressure against Soviet attempts to expand, thus containing the Soviet empire. Successful containment of the Soviet Union, according to the plan, would mean its eventual collapse. This policy remained in effect for the next forty-five years and was the rationale behind American involvement in the Korean and Vietnam Wars.

Funding

The Cold War dramatically changed the American economy and the role of the federal government in business. Containment meant that the United States committed itself, for the first time in American history, to a large standing army and to large peacetime defense expenditures, things many Americans had historically feared. One of the first steps in the Cold War was taken during the Truman administration when the United States granted $400 million to Greece and Turkey to fight Communist rebels within their borders. Additionally, America's spending on the military sky-rocketed, resulting in higher taxes and perpetual deficit spending.

Garrison State

In 1948 President Truman submitted the second largest peacetime budget in American history to Congress, justifying it as necessary to meet the threat of totalitarianism in the world. The budget came to $39.6 billion, with around $18 billion earmarked for military spending and international affairs. Such spending created a new industry in the United States devoted to the production of goods to supply weapons and other materials to the Pentagon. This industry, which became known as the military-industrial complex, became one of the largest industries in the United States and a crucial part of the economy. In a pattern similar to World War II mobilization, entire companies were supported solely by government spending. Unlike World War II, however, there was no end in sight. As long as the Soviet Union continued to exist there was a reason for the military spending. However, by 1961 outgoing president Dwight D. Eisenhower warned the nation of the danger the military-industrial complex posed to the future.

THE BRETTON WOODS AGREEMENT

With World War II coming to a close, American leaders wanted to ensure that past mistakes would not be repeated and that the United States would assume a place of global leadership. To these ends, American diplomats spent the final years of the war working to consolidate the gains American companies had made during the war by institutionalizing international free markets. The Bretton Woods Agreement negotiated in 1944 provided for three new institutions that were to help rationalize and open the world economy. They were the International Monetary Fund (IMF), the World Bank (International Bank of Reconstruction and Development), and the General Agreement on Tariffs and Trade (GATT). In a major triumph for both Truman and inter-nationalists, the Bretton Woods Agreement passed Congress in mid 1945.

Because the United States had survived the war intact and prosperous, it had the resources to dominate the monetary fund and the World Bank. American control meant that both institutions operated on an open-door policy of free trade. The GATT essentially lowered trading barriers between member countries. Under the IMF, member governments agreed to rationalize how currency was converted to other nations' currency and to avoid the competitive devaluation of currency. Furthermore, resources were set aside to provide a large fund to help stabilize exchange rates by assisting countries in need. The World Bank had the same membership as the IM F and loaned money to governments and to government agencies at "conventional financial terms"—that is, it charged interest on its loans.

Sources:

Michael J. Hogan, The Marshall Plan: America, Britain, and the Reconstruction of Western Europe, 1947-1952 (New York: Cambridge University Press, 1987);

William E. Pemberton, Harry S. Truman: Fair Dealer and Cold Warrior (Boston: Twayne, 1989).

Sources:

Robert Higgs, ed., Arms, Politics and the Economy: Historical and Contemporary Perspectives (New York: Holmes &, Meier, 1990);

Paul A. C. Koistmen, The Military-Industrial Complex: A Historical Perspective (New York: Praeger, 1980).

military-industrial complex A term used to describe the alleged dependence of advanced capitalist economies on the marriage of economic and military-political objectives during the period of the Cold War. A number of sociological studies of this phenomenon were undertaken, the best-known of which is probably C. Wright Mills's The Power Elite (1956), in which he argued that the homogeneous governing clique in post-war America represented an alliance of economic, military, and political power, and (contrary to the arguments of pluralists) had established the USA as simultaneously a ‘private corporation economy’ and a ‘permanent war economy’ within which ‘virtually all political and economic actions are now judged in terms of military definitions of reality’. Mills's account of the American power élite, and the ‘military capitalism’ it encouraged by perpetuating the arms race, was echoed in later studies. Fred J. Cook described America as a ‘warfare state’ in which political life was dominated by military definitions of foreign policy and economic rationality (The Warfare State, 1962). Similarly, John Kenneth Galbraith's study of The New Industrial State (1967) argues that Cold War imagery served to stabilize aggregate demand in the American economy, since ‘if the image is one of a nation beset by enemies, there will be a responding investment in weapons … [and so] … in public affairs as well as in private affairs, and for the same reasons, we are subject to contrivance that serves the industrial system’.

The main problems with this interpretation of the American social structure were that it was difficult to verify empirically (much of Mills's own evidence is perhaps best described as circumstantial) and that it was implicitly functionalist (witness Galbraith's claim that the weapons competition between the United States and USSR ‘is not a luxury: it serves an organic need of the industrial system as now constituted’).

military-industrial complex a country's military establishment and those industries producing arms or other military materials, regarded as a powerful vested interest. The term derives from a speech by US President Eisenhower in 1961.

military-industrial complex a country's military establishment and those industries producing arms or other military materials, regarded as a powerful vested interest.

Military‐Industrial Complex. See Weaponry, Nonnuclear; Eisenhower, Dwight D.