Is War Necessary for Economic Growth? : Military Procurement and Technology Development / Vernon W

Is War Necessary for Economic Growth? This page intentionally left blank Is War Necessary for Economic Growth? Military Procurement and Technology Development Vernon W. Ruttan 1 2006 1 Oxford University Press, Inc., publishes works that further Oxford University’s objective of excellence in research, scholarship, and education. Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With offices in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Copyright ᭧ 2006 by Oxford University Press, Inc. Published by Oxford University Press, Inc. 198 Madison Avenue, New York, New York 10016 www.oup.com Oxford is a registered trademark of Oxford University Press. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of Oxford University Press. Library of Congress Cataloging-in-Publication Data Ruttan, Vernon W. Is war necessary for economic growth? : military procurement and technology development / Vernon W. Ruttan. p. cm. Includes bibliographical references. ISBN-13 978-0-19-518804-2 ISBN 0-19-518804-7 1. Technological innovations—Economic aspects. 2. High technology—Military aspects. 3. Economic development. 4. Defense industries—Economic aspects—United States. 5. Technological innovations— Economic aspects—United States. 6. High technology industries—United States. I. Title. HC79.T4R878 2006 338.973'0927—dc22 2005007551 987654321 Printed in the United States of America on acid-free paper The micro processes governing the evolution of military technologies are no different than any other technology. —Edward W. Constant (2000) Normal design is very different from radical design such as that confronting the initiators of the turbojet revolution. —Walter G. Vincenti (2000) This page intentionally left blank Preface In this book I examine the impact of military and space-related procurement on the commercial development of six general-purpose technologies. In an earlier book, Technology, Growth, and Development: An Induced Innovation Perspective (2001), I discussed several examples but did not give particular attention to the role of military and defense-related procurement as a source of commercial technology development. A major generalization that emerged in my earlier work was that the public sector had played an important role in the research and technology development for almost every industry in which the United States was, in the late twentieth century, globally competitive. During the winter of the 2002–2003 ac- ademic year, commitment to present several seminars led to a reexamination of what I had written in Technology, Growth, and Development. It became clear to me that defense and defense-related institutions had played a major role in the research and technology development of many of the general-purpose technologies that I had discussed in the earlier book. The military procurement issue was sitting there in plain sight, but I had been unable or unwilling to recognize it! It was with considerable reluctance, then, that I decided to write this book. I shared the view advanced by John U. Nef in his classic book War and Human Progress (1950) that the impact of war on military technology was to due to the intensification of military procurement during wartime, which itself drew on the accumulation of earlier advances in scientific and technical knowledge. The purpose of this book is to demonstrate that military and defense-related procurement has been a major source of technology development across a broad spectrum of industries that account for an important share of U.S. industrial production. Some colleagues and reviewers have urged me to give more attention to the analytical and policy issues typically included in research in the field of defense research and development. Others have urged me to develop a more comprehen- viii PREFACE sive economic history of military and defense-related technology. My interest is both broader and narrower than these suggestions. My focus on the impact of defense procurement on commercial technology development captures a much more inclusive range of research and technology development than defense research and development. My focus on the impact of defense and defense-related procurement on commercial technology development is narrower, however, than a comprehensive economic history of the development of the military and commercial aircraft or the computer industries. I owe a very large debt to the numerous colleagues who have critically reviewed earlier versions of the book. (Specific acknowledgments appear at the ends of many chapters.) I owe a particular debt to Richard Nelson, Nathan Rosenberg, and Rob- ert E. Evenson, whose research and counsel have contributed to the development of my own thought on the economics and history of research and technology development. I am indebted to Oxford University Press for permission to draw heav- ily on several chapters, particularly 7, 9, 10, and 11, from Technology, Growth, and Development. Elaine Reber typed and retyped the manuscript, and corrected my spelling and usage. Mary Keirstead’s technical editing of the manuscript forced me to clarify both my thoughts and my expression. Louise Letnes has contributed to the accuracy and completeness of citations. Contents 1 War and Economic Growth 3 Historical Perspectives 3 Rate and Direction of Technical Change 8 Induced Technical Change 9 Evolutionary Theory 11 Path Dependence 12 Radical Technology 13 The Book Plan 14 2 Interchangeable Parts and Mass Production 21 Interchangeable Parts 22 Springfield and Harpers Ferry 22 Diffusion of the Armory System 25 Mass Production 27 Bicycle Manufacture 28 The Model T Idea 29 Perspective 30 3 Military and Commercial Aircraft 33 Struts, Wires, and Glue 34 The NACA Era 36 Policy Advice 39 Wings and Propellers 40 Jet Propulsion 44 High-Speed Flight 48 ix x CONTENTS Military and Commercial Aircraft at Boeing 54 Wartime Success 54 The Design Revolution 56 The NASA Era 60 Aeronautics Research at NASA 60 International Competition 62 Perspective 64 4 Nuclear Energy and Electric Power 69 The Electric Utility Industry 70 Nuclear Energy 71 Atoms for War 71 Atoms for Peace 75 Cost Inflation 79 Alternative Energy 81 Perspective 86 5 The Computer Industry 91 Inventing the Computer 92 Firing Tables and Cryptology 92 Whirlwind and the Semi-Automatic Ground Environment 95 Semiconductors 99 Supercomputers 103 Software 107 Perspective 109 6 Inventing the Internet 115 Creating ARPANET 116 Packet Switching 117 Learning by Using 120 Designing the Internet 122 Institutional Innovation 123 Perspective 126 7 The Space Industries 130 Missiles and Satellites 130 The German Rocket Team 131 CONTENTS xi Project Vanguard 132 Jupiter and Explorer 133 CORONA 134 Weather Satellites 136 Space Communications 138 Experimentation 138 Commercialization 140 Earth-Observing Systems 145 Geographic Information Systems 145 Landsat 147 Global Positioning 151 Perspective 153 8 Is War Necessary? 159 Technological Maturity 163 Structural Change 166 Spin-Off 167 Dual Use 171 Consolidation 174 A Future for General-Purpose Technologies? 176 Private Sector 177 Public Sector 178 Is War Necessary? 183 Perspective 184 Appendix 1: From Concept to Commercial Development: Seven General-Purpose Technologies 191 Appendix 2: Computers, Microprocessors, and the Internet: A Counterfactual History 195 Author Index 197 Subject Index 203 This page intentionally left blank Is War Necessary for Economic Growth? This page intentionally left blank 1 War and Economic Growth It is difficult to overemphasize the importance of the historical role that military procurement has played in the process of technology development. Knowledge acquired in making weapons was an important source of the industrial revolution. To bore the condenser cylinders for his steam engines, “Watt had to turn to John Wilkinson, a cannon-borer, who had invented the one machine in all England that could drill through a block of cast iron with accuracy” (Kaempffert 1941, p. 435). In France, the navy provided the market that gave French entrepreneurs an op- portunity to catch up with British advances in ferrous metallurgy (McNeill 1982, pp. 177, 211–212). In the United States, what came to be termed the American system of manufacturing emerged from the New England armory system of gun manufacture (Rosenberg 1972, pp. 87–116; Smith 1985, pp. 39–86). During almost every year since World War II, defense and defense-related research and technology development expenditures have accounted for at least two thirds of all U.S. federal government research and development (R&D) expenditures (National Science Board 2004, pp. A4, 60). Historical Perspectives The relationship between war and economic development has been controversial in economic history.1 In Krieg und Kapitalismus (1913), Werner Sombart argued that in Western Europe war and the preparation for war gave rise to the economic institutions of capitalism (Smith 1985, pp. 29–30). In his classic work, War and 1. In this section I have drawn on the exceedingly thorough review of the literature on the history of military institutions and social change by Hacker (1994, pp. 768–834). 3 4 IS WAR NECESSARY FOR ECONOMIC

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