What is the appropriate role for the government to play in managing the health and vitality of the defense industrial base in an era of declining defense budgets? The United States has traditionally been less autarkic in its defense industrial base policies than either its allies or its rivals. American leaders have also been less willing to utilize industrial policy measures to support the defense industrial base. In the late 1980s, however, fundamental questions began to emerge about whether market forces alone could be relied upon to provide the United States with the kinds of capabilities and capacities the nation would need to meet the threats of the future. The growing challenge from abroad to the competitiveness of a broad array of U.S. industries suggested to many that a more interventionist approach might be needed in sectors where the United States was becoming dependent on external sources of supply. But public sector intervention always carries with it the possibility of misallocation of economic resources and the injection of political favoritism in the picking of winners and losers.
The decline of U.S. defense budgets and the increasing globalization of U.S. industries, including defense industries, has brought a new urgency to the problem of foreign dependence. At the same time, increasing sophistication in the analytical community--especially the emergence of strategic trade theory and the rigorous appreciation that concentration among external suppliers can constitute a genuine national security threat--has raised the level of debate. These are the analytical and policy trends that Erik R. Pages captures with unprecedented clarity.
Responding to Defense Dependence traces the evolution of concern about America's growing dependence on foreign sources of supply for vital inputs to the U.S. defense industry. Dr. Pages examines the U.S. response, as policymakers struggled between laissez-faire and various forms of industrial policy. The task has been to find the right balance between simply letting the market work on its own and engaging in the more blatant forms of public sector intervention.