Personal Theories of Power: The Defense-Industrial Base

This article was external pageoriginally publishedcall_made by the external pageThe Bridgecall_made. It forms part of the external pagePersonal Theories of Powercall_made series, a joint Bridge-CIMSEC project which asked a group of national security professionals to provide their theory of power and its application.

Marching Through History

In 1528, external pageCharles V of Spaincall_made hired a Genoese firm to supply and operate a fleet of galleys to help control the Italian coast. Due to their increased size and sophistication, the price of galleys grew. By 1570, this led his son external pagePhilip IIcall_made to experiment with having court administrators operate seventy percent of Spain’s fleet. They failed to recruit experienced oarsmen or to provision equipment efficiently. The price of operating galleys doubled without any vessel improvements before the policy was reversed to private enterprise (David Parrott, “ external pageThe Business of War: Military Enterprise and Military Revolution in Early Modern Europecall_made“, New York: Cambridge University Press, 2012).

In 1603, Charles’s grandson, external pagePhilip IIIcall_made paid 6.3 million ducats to Gonzalo Vaz Countinho, a private merchant, for 40 ships and 6,392 men. This eight year contract supplied Spain with its entire Atlantic fleet. Twenty-five years later, external pagePhilip IVcall_made contracted a Liège company to build cast-iron cannon and shot. By 1640, 1,171 canons and 250,000 shot were built. Until the end of the eighteenth century Spain was self-sufficient in iron guns (Parrot, “The Business of War”).

Contracting was not limited to the external pageHouse of Habsburgcall_made. Governments have always relied on industry to provide materiel. It is not surprising then that in external pageMichael Howard’scall_made classic “ external pageWar in European Historycall_made” private enterprise plays a prominent role. Knights, mercenaries, merchants, and technologists shaped the history of Europe and thus its wars (Michael Howard, “ external pageWar in European Historycall_made“, New York: Oxford University Press, 1976).

An Industry is Born

For centuries supply caravans traveled with armies and small, decentralized, enterprises such as blacksmiths were ubiquitous. To profit, merchants repurposed equipment on commercial markets. Other proprietors assumed financial loss for military titles or, when victorious, profited from the spoils of war (Geoffrey Parker, “ external pageThe Military Revolution: Military Innovation and the Rise of the West, 1500-1800call_made“, 2nd Edition, Cambridge University Press, 1996).

The external pageThirty Years’ Warcall_made (1618-1648) changed the scale of conflict and the materiel required to conduct it. At last there were “large-scale profits to be made” from the “business of war” (Parrot, “The Business of War”). In Genoa, Hamburg, and Amsterdam centers comprised of weapons manufacturers emerged alongside merchants that specialized in capital, financing, and market access. A multinational arms industry was born that “cut across not just national, but confessional, and indeed military boundaries” (Howard, “War in European History”).

Berlin based external pageSplitgerber & Daumcall_made was one firm born from this system. Formed in 1712, its two proprietors began as commissioned agents. They raised capital to supply munitions first to local arsenals inexternal pageSaxonycall_made and eventually the external pagePrussian armycall_made itself. Their growth can be attributed to an early observation: that success in their business “could be achieved only within the framework of a strictly organized mercantilist economy” (W.O. Henderson, “ external pageStudies in the Economic Policy of Frederick the Greatcall_made“, Oxon: Routledge, 1963.). Patriotism became a marketing tool.

By 1722, Splitgerber & Daum was manufacturing “gun barrels, swords, daggers, and bayonets” at Spandau and assembling guns at Potsdam (Henderson, “Studies in the Economic Policy”). By mid-century it was a conglomerate.external pageFrederick the Greatcall_made, unlike his grandfather the “external pagemercenary kingcall_made“, was not an admirer of contractors. But after the external pageSeven Years’ Warcall_made ended in 1763 he guaranteed the company a “regular flow of government orders” as long as it remained loyal to Prussian interests (Christopher Clark, “ external pageIron Kingdom: The Rise and Downfall of Prussia, 1600-1947call_made“, Cambridge: Harvard University Press, 2006). He understood that in order to “raise Prussia to the status of great power required the services of merchants, manufacturers, and bankers” (Henderson, “Studies in the Economic Policy”).

Pouvoirs Régaliens

Twenty-six years later, the external pageFrench Revolutioncall_made would change Europe. Until then, states were the property of absolute sovereigns; after they became “instruments of powerful forces dedicated to such abstract concepts as Liberty, Nationality, or Revolution” (Howard, “War in European History”). As the nature of the State changed, so did its wars. French armies were now comprised of conscripts. In 1794, France attempted a planned economy. It reasoned that if people could be conscripted so could resources. The experiment failed due to inefficiency; manufacturing reverted back to private enterprise before the year’s end.

Industry would flourish during the external pageNapoleonic Warscall_made. From 1783 to 1815 two thirds of Britain’s naval tonnage was produced by private shipyards. And the external pageRoyal Navycall_made began to experiment with managing industry. It sacrificed deals with large lower-cost providers to bolster small contractors that it considered to be more flexible. In the nineteenth century, the birth of nations launched state industries: private, but British shipyards; private, but German steelmakers.

external pageKruppcall_made would embody this development. Founded in 1811 in Essen (by then external pagePrussiacall_made), it would first develop steel. By 1851 it became the primary provider of Prussian arms and, after German unification, the country’s preeminent defense firm. By 1902, Krupp managed the shipyards in Kiel, produced external pageNassau-class dreadnought armorcall_made, and employed 40,000 people (Harold James, “ external pageKrupp: A History of the Legendary German Firmcall_made“, Princeton: Princeton University Press, 2012).

Defense Industrial Base Power

Defense industries evolved from distributed providers, to unaligned enterprises, and finally to state-managed industries. They became consortiums of private or government-owned entities that translate the natural, economic, and human capital resources of a state into materiel (Merton J. Peck and Frederic Scherer M, “ external pageThe Weapons Acquisition Process: An Economic Analysiscall_made“, Boston: Harvard University, 1962).

World War II stretched this logic to its absolute; all state resources were translated into the machinery of war. In 1940 the US only built 2,900 bombers and fighters; by 1944 it built 74,000 on the back of industry. From 1941 until the war’s end 2,711 external pageLiberty shipscall_made were built; welded together from 250,000 parts, which were manufactured all over the country. And from 1942 to 1946, 49,324 external pageSherman tankscall_made were built by 11 separate companies such as external pageFordcall_made and external pageAmerican Locomotivecall_made — built by the “arsenal of democracy” (Jacques S. Gansler, “ external pageDemocracy’s Arsenal: Creating a Twenty-First-Century Defense Industrycall_made“, Cambridge: The MIT Press, 2011).

After the war, all countries began to balance national security objectives with resources via defense industrial base policies. A country’s industrial base capability could be measured as a combination of its scope (how many different cross-domain technologies it could develop), scale (at what quantity), and quality (battlefield performance).

The Path to Independence

National resources limit capability. Less capable countries are more dependent on allies than more capable ones (see Figure 1). As countries develop an industrial base their level of dependence decreases, but never goes away. This can be best understood through industry itself. Prime contractors rely on their supply chains. But a widget supplier is more dependent on its customer, than its customer is on it.