NEW YORK – The United States is at risk of losing its military edge. America’s armed forces may still be the most advanced in the world; after all, the US spends more than twice as much on military research and development as major powers like France and Russia, and nine times more than China and Germany. But America’s continued technological leadership is far from assured.
Since 2005, the US Department of Defense has cut R&D spending by 22%. In 2013, as part of a deal to avert a showdown over the debt ceiling, the US Congress mandated some $1.2 trillion in automatic spending cuts. The move, which requires reduced spending in numerous programs, including many defense research initiatives, was described by US President Barack Obama’s administration as “deeply destructive to national security.” If US defense innovation continues to erode, not only will America’s defense capabilities suffer; the country will also risk slipping in terms of commercial innovation and competitiveness.
Budget limitations pose some of the greatest challenges to the US military’s efforts to maintain its technological edge. The Army and the Missile Defense Agency have been particularly hard hit, with R&D spending nearly halved since 2005. The Navy’s research budget has been cut by some 20%, and the Defense Advanced Research Projects Agency (DARPA) – the organization tasked with keeping the US military ahead of the technological curve – has had to slash R&D spending by 18%. Even the Air Force, where research spending has traditionally been a congressional priority, has been forced to cut its budget by roughly 4%.
When money does get allocated, cost pressures too often encourage investment in projects that promise quick results – a bias that comes at the expense of long-term innovation that could provide a strategic advantage. Even DARPA has fallen prey to pressure for research that can demonstrate immediate progress.
To make matters worse, the US military’s innovation efforts face several structural problems. Six decades of attempts to reform the defense acquisition process have yet to yield fruit. Most of the design, development, and production of military systems is carried out by civilian industry, but decision-making remains firmly in the hands of military officials, who may not be able to strike the right balance between cost-cutting and innovation.
Rivalries within and among the military services once mimicked the role of competition in the private sector: they drove innovation. But with the end of the Cold War, the pressure to remain a step ahead has waned, depriving the defense sector of a crucial engine of progress. Moreover, top defense contractors’ R&D spending as a proportion of sales plummeted by nearly a third from 1999 to 2012. By contrast, America’s technology giants invest 4-6 times as much in R&D.
Meanwhile, the US is suffering from the hollowing out of its defense industrial base. Increased competition from China and other large emerging economies has eroded US manufacturing capabilities, jeopardizing America’s ability to develop the most technologically sophisticated defense platforms. The defense industry once created the new technologies – lasers, GPS, and the Internet, for example – that helped drive the American economy. Today, in most fields, civilian technology is likely to be leading the way.
The result can be seen in the rise of foreign competition in the international arms market. American manufacturers are finding themselves increasingly vulnerable in areas that they once dominated – including unmanned aerial platforms, intelligence surveillance and reconnaissance, missiles, and satellites – as low-cost competitors gain market share. In 2013, Russia’s weapons exports surpassed America’s by more than $2 billion.
In November, US Defense Secretary Chuck Hagel announced a new initiative to “sustain and advance America’s military dominance for the twenty-first century.” In a time of shrinking budgets and shifting strategic challenges, he focused on innovation. “Continued fiscal pressure will likely limit our military’s ability to respond to long-term challenges by increasing the size of our force or simply outspending potential adversaries on current systems,” he said. “So to overcome challenges to our military superiority, we must change the way we innovate, operate, and do business.”
Nine days later, Hagel handed in his resignation, which will take effect as soon as the US Senate confirms his replacement. A policy aimed at restoring defense innovation and production in America would ensure that the US upholds its global technological leadership and commercial competitiveness. Unfortunately, Hagel’s successor is likely to find that, in an era of limited budgets and automatic spending cuts, the type of comprehensive innovation strategy that Hagel envisioned may simply not be viable.
Dan Steinbock, a partner at Difference Group, was Research Director of International Business at the India, China, and America Institute and a visiting fellow at Shanghai Institutes for International Studies in China and the EU Center in Singapore.
Copyright: Project Syndicate, 2015.