August 1, 2005 | News Releases on National Security and Defense

Free Market For Weapons Critical to National Security, Study Shows

WASHINGTON, JULY 29, 2005 - The best way to strengthen the industrial base is to take a free-market approach to manufacturing and procurement, a study from The Heritage Foundation says.

That will prove especially challenging in this age of globalization, when critical products are more likely to be made in other countries. As the Heritage study notes, the military industrial base is complex and constantly changing, "therefore it can only be influenced and is almost impossible to control."

The study was designed to find the best ways to accomplish the difficult task of maintaining and improving the military industrial base. Heritage analysts worked for more than a year with experts in military affairs and industrial systems. They led workshops, conducted interviews and studied literature about the military supply chain.

Doing so will sometimes mean that critical components are manufactured overseas, but it will also ensure the government has access to the best tools available at the best prices possible. "Regardless of the product, each industry is responsible for maintaining its global competitiveness," the study says. "Consumers will continue to measure the value of products-including defense products-in terms of price, quality and availability."

The free-market approach proved more successful than other approaches studied, especially government-guided ones. The government-guided approaches failed because they force federal officials to make decisions about what products to manufacture, when and where to make them and how much or how many of each to make. The free market makes all these decisions much more efficiently and less expensively.

What the government ought to do, the report says, is encourage competition. For example, it could offer cash prizes that universities, industries and public contractors could compete for. This approach could generate useful new ideas on everything from energy efficiency to information systems.

At the same time, the government should encourage flexibility.

Take the American shipbuilding industry, which is falling behind its rivals because it is plagued by inefficiency. "The Army and Marine Corps find aluminum-hulled catamarans manufactured in Australia to be of great value," the report found. "However, the U.S. does not manufacture aluminum-hulled ships." Free-market competition would ensure our military can purchase the best ships and eventually would force American ship makers to upgrade to remain competitive.

Still, the report notes that free markets come with risks to national security. If made overseas, a critical component of a defense system could be withheld from the United States during a war. More seriously, a hostile nation could use our reliance on its manufacturing as a window for an attack.

But the report explains how policymakers can reduce this risk by increasing their knowledge of the supply chain-including the earliest stages where manufactures make critical pieces that will later be assembled into complete weapons systems.

The report is divided into five chapters. They describe the changing military industrial base, the challenges and concerns raised by those changes, principles for Congress to follow and, most importantly, recommendations for lawmakers to follow to protect and preserve the military industrial base.

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