AssemblingAmerica's Private Arsenal for Democracy, 1920-1961 Allen Kaufman • ProfissorofStrategic Management UniversityofNe•v Hampshire and VialtingPro•ssor, MIT Definseand Arms Control Studies Program WhenI firstread the Hagleycall for thisconference, I doubted that my currentwork on military-industryrelations would be of muchinterest to the conferenceorganizers. They askedfor proposalsto engendera dialogue betweengender, race, and classstudies scholars and businesshistorians. My proposalhardly ventured outside the usualbusiness-government vemacular of markets,competition, technology, strategy, bureaucratic politics, and war. Businesshistorians have done rather well mixingand matchingthe concepts associatedwith these words. So, when I received an e-mail invitation to participatein thisconference, I presumed some red guard hacker was spreading misinformationto sabotageHagley's efforts at bridgingthe gapbetween the haves(historians who studythe bosses)and the have nots (historianswho studythe masses).However, when a similarinvitation arrived weeks hter by snailmail, I relaxed,knowing that Hagley's e-mail was secure. Now, I wonderedwhat unfamiliartools I broughtto the studyof businesshistory and, more particularly,to business-governmentrelations. I evenfound myself in an e-mailconversation with a conferenceorganizer, who pointedto mywork's synthetic quality - i.e.,to my abilityto stringout markets, technology,strategy, etc. into .a sentence.However, when I satdown to write the paper,I haddifficulty using this trope. Synthesis succumbs to disciplinary difference.So, I turnedto theintroduction of my recentcoauthored work on corporatemanagement and the regulatorystate [Kaufman,Zacharias, and Karson,1995]. Although this book - Whichis part of the Oxford University Pressseries on businessethics - coversfamiliar themes in businesshistory, we askeda questioninspired by intellectualhistory: how did the modern corporation- whichfrom its inceptionseemed so 'inimicalto liberty- find a legitimateplace in thepost-World War II polity? Let me put theserather terse sentences into a familiarhistoriographic form.Business historians who examinedthe interactions between corporations andthe govemmenthave drawn heavily on Chandler'sThe Visibk Hand: The ManagerialRevolution in AmeffcanBusiness [1977]. Following his lead, they

t I am indebtedto HarveySapolsky and Eugene Gholz for theirencouragement and criticalguidance in writingthis paper. BUSINESS AND ECONOMIC HISTORY, Volumetwenty-six, no. 1, Fall 1997. Copyright¸1997 by theBusiness History Conference. ISSN 0894-6825.

252 AMERICA'S PRIVATE ARSENAL FOR DEMOCRACY / 253 customarilystart with the fm•nor a groupof firmsand treat their interactions withgovernment in purelyinstrumental temas. They ask f•rst how government regulationsrestraha corporate strategies, and secondhow managersrespond politicallyand economically to offset these constraints. In tellingtheir stories, thesehistorians account for the politicalenvironment much in the way a corporatesocial issues manager would ascertain the forces affecting a particular issue.Although these studies have contributed enormously to our under- standingof the dynamicsbetween business and government, in the maha they haveneglected the fieldof managerialcollective action and resolutely have refusedto discussnomaative issues [Vietot, 1994]. Another group of historians,working in the corporateliberalism tradition,begins with the notionof collectiveaction and nomas.Although writersin this traditiondisagree on manyissues, most contentiouslyover whetherthe largef•rm hasdetracted from democracy,they sharea strong commitmentto understandingthe interactionsbetween interests and nomas, marketsand the ruleof law [Hawley,1966; Sklar, 1988]. In tellingour tale, we let liberty'stenuous structure - namely,the tensionbetween public and private authorities, between control and autonomy, betweeninterest and procedure - provideour narrativethemes. These themes raisedadditional questions: how did the regulatorystate apparenfiy reconcile the moderncorporation's authoritarian order with liberty;in the struggleto fashionthe regulatorystate, how did managersovercome competitive discord to actcollectively; and how did they fashion a professionalcreed that portrayed themas liberty's modern stewards? Thesesame concerns inform my currentresearch on the mih'tary.After World War II, how did the politythat onceviewed the officercorps and its industrialsuppliers as illiberalthreats to democraticrule comfortablydelegate to theseofficers large discretionary powers, particularly over scientificand economicdevelopment? What structuresdid Congressput in place that checkedthe officercorps' newly gained power? In articulatinga professional doctrine,how did procurement officers reconcile the military's command/control procedureswith liberty'sdemand for autonomousbehavior? And, how did the mih'tarygain the cooperationof so many civilians,particularly scientists, engineersand managers, in its postwar campaign to continuouslyrevolutionize mih'taryweapon systems? Historicalanswers to thesequestions have a convenientstarting point - the nation'sconstitutional debates, where propertied white malesnegotiated temasof association.2 These record the politicalvalues that, in largepart, definedthe initialrules regulating the military'srelationship to Congressand industry.A skeletalofficer corps, public arsenals, and contracts emerge as the basicconcepts by which America's liberal polity constrained the military and its industrialcontractors from promoting wasteful, bellicose policies.

2 My summaryof the Constitution'sliberal biases relies on Pangle[1988]. Pangle's interpretationneeds the historicaltempering found in Wood [1991]. 254 / AI'J,EN KAUFMAN

By the earlytwentieth century, aviation - and its air powerprophets - allowedCongress to considerthe marketas an alternativeto publicarsenals. Unlikeother military weapons, aviation promised mass commerdal markets. Air officerswillingly divested their ak arsenalsto sustainCongressional and industrysupport for an independentak force.However, these markets did not materializein sufficientscale, fither during the interwar years or duringthe cold war'sformative years, to sustaina war-makingaircraft industry. Air officers foundthat, by virtueof theirmonopsony, they still exerted control over the industry.They acknowledgedthis regulatorypower when, at World War II's conclusion,they secretlystamped the akcraftindustry a privatearsenal. But, this acknowledgmentdid not invalidatethe traditionaldivide between public andprivate authority. The militarygained industrial and scientific support by contractingfor a "privatearsenal." In sodoing, the militaryavoided criticisms thatit soughtto replacea liberalorder with a garrisonstate.

The GovernmentA•senal System

The call for a more perfectunion had largelyarisen from the Con- federafion'sobstacles to unifiedmilitary action and the commercialrivakies the Confederationfostered [Hamilton, Madison, and Jay, The Federalist, pp. 1-53; andKohn, 1991,pp. 61-94].Alexander Hamilton's writings offer insights into the earlymilitary establishment. He recommendedthat a peacetimearmy be keptunder the Confederafion'scontrol. Like other Continental Army officers, Hamiltonhad found the statemilitia poorly trained and unreliable in battle.His reportcalled for a regulararmy of approximately3,000. To supplementit, the reportwould have the nationalgovernment establish a largerelite reserve whichwould volunteer for fight yearsand be subjectto trainingtwenty-six daysa year.This force,paid and supplied by the nationalgovernment, would come into active service should war break out. State militia would be an additionalforce that could be mobilizedin emergencies.In addition, the report calledfor an extensivearsenal system to supplyarms and preserve ordnance skills,particularly in the manufactureand use of artillery[Hamilton in Lodge, vol.6, 1886,pp. 71-79]. Justificationsfor publicarsenals went beyond market scarcity. Hamilton foundan additionalfault in privatearms suppliers' opportunist propensity: "as the calculationsof [privateordnance] contractors have reference primarily to theirown profit, they are apt to endeavorto imposeon thetroops articles of inferiorquality[,]...not [to deliver]as early as the servicesrequired, or notin sufficientquantity..." Avarice might be a usefulpassion for spontaneously organizingthe economy,but Hamilton,like his intellectualbenefactor, Adam Smith,warned government against capitalist claims that policies beneficial to their interestsnaturally promoted the generalwelfare. Thus, Hamilton cautionedthe government to establisharmories "to providefor thedeficiendes of thecontractors..." [Lodge, vol. 6, 1886,pp. 108-109]. Hamilton'swariness, though, did not let him concludethat the governmentshould rely solely on military armories;he advocateda AMERICA'S PRIVATE ARSENAL FOR DEMOCRACY / 255 procurementsystem that combinedprivate and public manufactures. When Congressasked him, as Secretary of theTreasury, to reporton the bestmeans "to renderthe UnitedStates independent on foreignnations for militaryand otheressential supplies[,]" [Lodge, vol. 3, p. 294]he respondedwith his much cited"Report on Manufactures."To his mind,a nationaldefense industry wouldnaturally come about once the UnitedStates had a vibrantcommercial manufacturingsector. However, United Statesnascent manufacturers could hardlycompete against rival Englishor Europeanfirms. To overcomethis comparativedisadvantage, Hamilton made a controversialrecommendation: let governmentpromote infant manufacturers,most judiciouslyby bounties [Hamilton,"Manufactures, Communicated to the Houseof Representatives, December5, 1791,"in Lodge,vol. 3, pp. 294-416]. Hamilton'sadvocacy for subsidizedmanufacturing, arsenals, and a standingarmy comprised only threeelements in his programfor economic development;a funded debt, national bank, and excisetaxes completed his plan.During the federalistperiod much of Hamilton'sprogram became policy, althoughnot withoutopposition nor as fullyas he hadrecommended. During theantebellum period much of thisprogram, particularly the national bank and subsidizedmanufacturing, generated intense political battles. The War of 1812regrettably revealed the arsenal system's deficiencies. In 181SCongress passed "An Act of the betterregulation of the Ordnance Department."This Act explicitlystated the OrdnanceDepartment's responsi- bilityand increased its authority.Previously, the Department merely inspected ordnanceand supervisedits manufactureat governmentarsenals. Now, the Department'sCommissary General of Purchasehad authorityto makecon- tractsfor ordnanceand commandover the Springfieldand HarpersFerry Arsenals.Finally, the law instructedthe OrdnanceDepartment to establish uniformstandards for allordnance, their storage, and repair [M.R. Smith, 1985, pp. 39-86;Strum, 1986]. Small arms manufacturers,which so benefitedfrom government contracts,complained bitterly about government competition during market upswingsand downturns. By 1830a newgroup of smallarms manufacturers emergedthat were lessdependent on governmentfor financingand tech- nologicalassistance than earlier companies. These firms expanded the market for theirproducts both domestically and abroad. While they competed fiercely with oneanother and undid much of thecooperation that had existed earlier, theycame together to protestgovernment competition. In fact,during the 1850sCongress seriously considered doing away with governmentarmories. Thesecompanies followed a similarstrategy after the Civil War, when demand contracted[Deymp, 1948, pp. 117-132and 202-214].

The Army Air CorpsTakes Command:1920-1926

At the turn of the century,the War Departmentstill oversaw governmentarsenals that designed and manufactured diverse military products for which commercialmarkets did not exist.The oldest,the Springfield 256 / ALLEN KAUFMAN

Armory,manufactured small arms; Watervliet Arsenal, artillery; Watertown Arsenal,seacoast gun carriages,railway gun mounts, and antiaircraftmounts; FrankfordArsenal, small arms ammunition, artillery ammunition components, and fire controlinstruments; Rock Island Arsenal, gun carriages;and Picatinny Arsenal,artillery munition, bombs,and pyrotechnics. All of thesearsenals datedback to thenineteenth century [Campbell, 1946, pp. 35-51; Thomson and Mayo,1960, pp. 72-73].However, by WorldWar I, tinkersand inventors had spurreda new technology,aviation, that promisedto satisfymilitary and commercialneeds. In thewar's aftermath, during the interwar aviation scandals, politicalopportunities arose for theArmy to establishan aircraftmanufacturing presence.However no powerfulvoice emerged. Instead, an inchoateprivate arsenalsystem became recognizable, one that neither Congress, the Army nor industryfully acknowledged until World War II's demobili•.afion. By themid-1920s, military theorists acknowledged that aircraft could be usedas an offensiveweapon and as a deterrent.A nationthat initiatedair strikeson a foe'smilitary, economic. and populationcenters might achieve a "first-strike"advantage. To takethis action, a nationhad to havetechnolog- icallyproven bombers and an industryready to massproduce a forcelarge enoughto overwhelmthe enemy.This threat of massdestruction, especially of vulnerableciries, made a mightyair forcea deterrent.In thisnew technological era, militaryair advocatesand aircraftmanufacturers warned that no nation couldafford to be withouta viablemass production aviation infrastructure. However,no governmentcould riscally afford to buildthe necessarycapital intensivefactories nor train the requisiteskilled labor force. Aviation manufacturinghad to be self-sustaining;it had to be commerciallyviable) Within Congress,these arguments ascended. Doomsayers fueled pru- dentialcongressional behavior. Happier impulses also charged congressional action.Some representatives sawin commercialaviation a promise.to developa hightechnology industry free from trusts. Jacob Vander Meulen in The Politicsof Aircraft:Building an Araerican Mt7itaEvIndus• [1991] provides a rich story on how these forces worked against the developmentof a publicaircraft sector. Besides the antipathytoward a strongmilitary, Vander Meulen notes Congress's hostility toward big business or "trusts."Congress' progressive (• la Wilson)and populistrepresentatives hopedthat the aircraftindustry would reconcile modern technology and small scaleproduction. In this respect,Congress more or lessagreed on private sectorcontrol over aircraftmanufacturing. But disagreementsarose over whetherlarge or smallfirms made the most efficient manufacturers. Consolida-

3The followingparagraphs draw on privatesector testimony in Presidentof theUnited States,Aircraft in NationalDefinse: Message from the President ofthe United States Transmitting the Reportof the Board, Appointed •y the President ofthe United States on Sqtember 12, 1925,to Make a Studyof theBest Means of Developingand App[ying Aircraft in NationalDefinse, (The Morrow Report),Senate Document No. 18,69th Congress, 1st Session, (Washington, DC, 1925);and U.S.Congress, House of Representatives,Inquiry into Operations ofthe United States Air Senices: Reportof theSelect Committee of Inquiry into Operations of the UnitedStates Air Senices,(The LampeftCommittee) Report No. 1653,68th Cong., 2nd Session (washington, DC, 1925). AMERICA'S PRIVATE ARSENAL FOR DEMOCRACY / 257 tion occurredin the 1920s.Investors became active as technologyimproved andgovernment made promises about stimulating future commercial growth. Financiershad to assurelong-term returns, a processthat could best be done througholigopolistic arrangements. Despite mergers and consolidation,fin- anciersfailed to containcompetition as commercial demand faltered. While the governmentat firstencouraged this consolidation by its mailsubsidy program, it laterre•rersed itself as antitrust advocates exposed corruption in themail subsidies. Congress'sand industry's insistence on a privateaircraft industry had the potentialto alienateArmy air partisans.Against long standingtradition, Army air officersjoined the commercialchorus. Without direct access to the GeneralStaff or the Secretaryof War, Army aviatorsfound it difficultto advanceair doctrine independent from land force strategy. In p•:omoting their organizationalambitions, these aeronauts found private sector allies a godly gift. Withoutan arsenaltradition to protect,the Army'swinged warriors willinglyconceded Congress's and industry'ssacrificial price [U.S. House of Representatives,pp. 520-51]. In 1926Congress passed the Air CorpsAct. It institutedthe Army Air Corp (AAC),giving Army aviatorsthe organizationalwherewithal to pursue independence[Brown, 1988, pp. 59-83]. The law also came close to designating the aircraftindustry a privatearsenal. The Act approvedexpanded AAC purchases,both to satisfymilitary needs and to providethe fakeringindustry with a steadydemand. Still, the Act did not acknowledgethe industryas "a national defenseasset," for it instructedthe A_ACto determinedemand based on its- not theindustry's - requirements.

Organizing For Mass Production, 1927-1942

In theyears following the Air CorpsAct, throughthe early years of WorldWar II, theAAC honedits m-house contractual skills. Wright-Patterson Air Base trainedengineers and procurementofficers in the basicsof aeronautics,production, management and contracting. These staffs lacked the skillsand resources to designand manufacture aircraft, but theycould ably writespecifications fornew aircraft, contracts to procurethem, and procedures for overseeingproduction chains and product quality [Walker and Wickham, 1987, pp. 118-145]. After mobili7.ation,Congress initiated reforms that renamedthe AAC the Army Air Force (A_AF)and allowedits to conduct strategicope. rations separately from the Army'sland forces[Sherry, 1987, pp. 147-77]. To ensurethe AAF playeda "decisive"role in winningthe war, the air officercorps adopted known designs, standardized parts (for government furnishedequipment) and fostered intra- and inter-industry cooperation. To managethese production lines effectively, the A_AF organized its engineering divisionalong product market (or to usethe currentterm, weapon system) ratherthan functional lines and its productiondivision into unitsthat worked withspecific prime contractors. 258 / ATJ.EN KAUFMAN

These actionsprovided a settingin which industrycould develop processesfor massproducing akcraft. Though the AAF set doctrine,prime aircraftmanufacturers retained the designand engineering know-how to ramp up production,to assembleproduction teams and to educatenon-aviation firms[Holley, 1964; Lilley, Hunt, Butters,Gilmore, and Lawlet, 1947; Taylor andWright, 1947; Putnam, 1947]. In short,America's ak arsenalfor democracy operatedwithin liberty's divide between public and private authority. The AAF actedlike a smartconsumer - or moreprecisely, as a wellfinanced monopsony - whocontracted, rather than commanded, for a revolutionin ak production.

The Air Force Private Air Arsenal, 1943-1950

Whenak productionpeaked in 1943,the AAF beganto planfor service autonomyand for the next war. Though the AAF had favoredknown technologiesduring the war, its officercops keenlyunderstood: 1) that ak power'sdominance depended on scientificand engineeringadvances; 2) that the aircraftindustry and its supportingsdenfific communities constituted a privatearsenal; and 3) that imaginarywars - i.e., a scientificquest to build weaponsystems that betteredthe best- constituteda technologicalimperative thatCongress could hardly ignore. In a practicalsense, the tasksfor sustainingak power'sindustrial foundationsbegan in earnestin August,1945, when the War and Navy Departmentsreconstituted the Army Navy MunitionsBoard (ANMB). These Departmentscharged the Board to formulatefuture mobili•.afionplans. 4 Withina year,the Board recommended that the military had to yearlypurchase a minimumof 3,000replacement akcraft to sustainthe industry'sresearch, designand manufacturing capabilities. The Boardadded that the military had to maintain26 millionsquare feet of standbyfacilities to meetfuture mobili•.afion needs)

4 Memorandumfor: Colonel W.D. Eckert, Chief, Readjustment& Procurement DivisionOffice, Assistant Chief of Air Staff-4,Subject: Report on theState of Development of IndustrialMobilization Planning, 27 May 1946,National Archives Record Group 341 HQ U.S. Air Force,Entry 468 DeputyChief of Staff,Material Director of IndustrialResources IndustrialPlans Division Facilities Branch General File 1944-50,Box 60, Folder3, p.4. This memorandumprovides administrative information on the ANMB, the conflictsamong the agenciesand the AAF's surplus disposal plan. Also, for a historyof ANMB'sresponsibilities, seeMemorandum, Subject: Application of NationalSecurity Clause to Army Air Forces SponsoredIndustrial Facilities, To: J C Vaughan,20 June1947, from GrandisonGardner, MajorGeneral, U.S.A., Acting Asst. Chief of Air Staff-4,National Archives Record Group 341 HQ U.S. Air Force,Entry 468 DeputyChief of Staff,Material Director of Industrial ResourcesIndustrial Plans Division FacilitiesBranch General File 1944-50, Box 60, Folder 3. 5 Memorandumfor the UnderSecretary of War,the AssistantSecretary of the Navy, Subject:Report of Air CoordinatingCommittee, 18 July1946, from RichardR. Deupree, ExecutiveChakman, National Archives Record Group 341 HQ U.S. Air Force,Entry 468 DeputyChief of Staff,Material Director of IndustrialResources Industrial Plans Division FacilitiesBranch General File 1944-50,Box 61, Folder 6. AMERICA'S PRIVATE ARSENAL FOR DEMOCRACY / 259

WrightField's Industrial Plans Section, Logistics Phnning Division had the responsibilityfor developingAAF mobilizationplans. It promisedto providetools for managingthe industry's development. These included: census methodsfor acquiringand updatingaircraft industry data; forums for inter- actingwith industryto reviewmobilization production schedules; plans for ensuringmaterial supplies and standbyfacility reserves to meetmobilization needs;principles for sustainingthe industry'scompetitive health; and public relationscampaigns to buildpublic support. As the PlansSection pursued ks work, Lt. GeneralN.F. Twining, CommandingGeneral Air Materiel,asked his superior,General Spaat_z, Chief of Staff, to formally acknowledgethe AAF/aircraft industry'sspecial relationship.6 Twining asserted that "the aircraft industry [is] in effectthe AAF arsenal.•vV4•ereas, Ordnance, for example,relies primarilyon its own government-ownedand operatedarsenal system for its researchand developmentand current procurement, the Army Air Forcesmust rely on the privatelyowned and operated aircraft industry." General Spaat_zagreed with Twining's description.This special relationshipbetween the AAF andthe industrybecame the subjectmatter for anAAF internaldocument "Strategic Concepts of IndustrialPreparedness." To capturethe skiesand to obliteratean enemy'sindustrial base, air power dependedon the nation'sscientific and industrialingenuity to bear superior aerialweapon systems. Recognitionand frank admission is neededby theAir Forces that, to an extentnever true of land and seaarms, the air power of the United States is centeredin industry'shands. The problemshenceforth are largely technical and industrial. Industry nowembraces the design, development, production, supply, and maintenanceof air weapons. Industry is our arsenal of democracy.There must be an immediateintegration into theAir Forces as a voluntaryair industrialreserve of air weapons industries...[p]ossible only if the Air Forcesare able to adapt theirconcepts, organizations and methods to conformto 1) the new realitiesof air war, and 2) to the establishedhabits of Americanindustry. This meansan Industry-AirForce team in the broadestsense of theword. It meansa teamthat can function in peaceas well as

6 Memorandum, Subject:Preferential Treatment for Aircraft Manufacturerswith Respectto the Purchaseor Leaseof Government-OwnedFacilities. To: Commanding General,Army Air Force,13 March1946, from N. F. Twining,Lieutenant General, U.S. A., Commanding,National Archives Record Group 341 HQ U.S.Air Force,Entry 468 Deputy Chief of Staff, Materiel Director of IndustrialResources Industrial Plans Division Facilities BranchGeneral File 1944-50,Box 60, Folder4. This explains,Twining went on, why the Army requested$2.2 billion of government-ownedfacilities, while the AAF onlyasked for $420 million. 260 / _AIJ.F.NKAUFMAN

in war.It meansa teamin airresearch, development, production, supply,maintenance, and training of personnel.7 This deske to build an AF/industryteam influencedprocurement decisions.The AF Aircraftand Weapons Board considered objections to its proposedfiscal 1948 airplane purchasing plan. Critics found the planlacking becausethe Board had developed it "solelyon militaryconsiderations" without regardto its industrialconsequences. Allegedly, these would be considerable. One reportclaimed that "86% of 1948appropriations would be placedwith three airframe manufacturers." Such a concentration would undermine "a soundaircraft industry capable of adequateexpansion to meetmobili7.ation requirements."Moreover, the aircraftindustry's desperate financial situation madeit imperativefor the AF to spreadaround its business.8 The Board acknowledgeditsmistakes and reworked its plan? The Cold War Air Force:Strategy and Structure,1951-1961 With independencein 1947,AF officersdevised a strategyto ensureits strategicdominance. Simply put, the AF differentiateditself by maintainingits grip over scientificand engineeringaerospace developments. Even before World War II ended, AAF Chief of Staff H.H. Arnold had contractedfor a scientificreport to guideair weaponsystems development over the next 20 years.The finalreport called for a permanentweapon systems revolution. •ø An imaginedtechnological imperative gave the AF officercorps its justifica- tions for largepostwar budgets. Through them, theseofficers successfully connectedscience's limitless quest after knowledge with the aircraftindustry's limitlessquest after profits. To implementthis strategy, the AF officercorps had to decidewhether to makeor buybasic and applied research [Williamson, 1985]. Earlier, the AAC had gone througha similarexercise in whetherto make or buy its aerial weapons;political factors had favoreda buy decision.Similar considerations cameto influencethe AF's outsourcingof basicand appliedresearch. AF

?"Strategic Concepts of Air IndustrialPreparedness," National Archives Record Group 341 HQ U.S. Air Force,Entry 468 DeputyChief of Staff, MatedelDirector of Industrial ResourcesIndustrial Plans Division Facilities Branch General File 1944-50,Box 60, Folder3. 8 HeadquartersUnited States Air Force,Secretariat of the USAFAircraft and Weapons Board,Agenda for SecondMeeting, USAF Aircraft and Weapons Board,January, 1948, Item 2 andTab A, NationalArchives Record Group 341 HQ U.S.Air Force,Entry 190, Deputy Chiefof Staff,Development Director of Requirements,Executive Office, Mail andRecords Branch,First Aircraft and Weapons Board Subject File 1947-1948,Box 192,Folder Untitled. 9 Memorandumfor the Chiefof Staff,Subject: Summary Minutes of SecondMeeting, USAF Aircraft and WeaponsBoard, 27 January1948, from F.H. Smith,Jr. Brigadier General,USAF, Secretary,USAF Aircraftand WeaponsBoard, National Archives Record Group341 HQ U.S.Air Force,Entay 190 DeputyChief of Staff,Development Director of Requirements,Executive Office, Mail and RecordsBranch, First Aircraft and Weapons BoardSubject File 1947-1948,Box 183,Folder Untitled. •0 Theodoreyon Karman,the notedCalifornia Institute of Technologyaeronautical scientist,formed this researchgroup, which eventually became the AF ScientificAdvisory Board[Strum, 1967, pp. 1-79]. AMERICA'S PRIVATE ARSENAL FOR DEMOCRACY / 261 officershad devoted themselves to formingair warrior teams, not to building scientificresearch centers. An internalscientific corps would requiretwo promotionaltracks that could undermine the AF's martial culture. Moreover, by relyingon universityand industry teams, outsourcing allowed the newly formedAF to takethe initiative against rival, well established services. And, outsourcinghad important precedents and strongprivate sector proponents.Before World WarII, the armedservices had reliedon the NationalAdvisory Committee on Aeronautics,which contracted for scientific research[Roland, 1985]. During World War II, the War Departmentkept to thiscourse by establishingthe Office of ScientificResearch and Development [Owens,1994; B. Smith,1990; Sapolsky, 1990]. Scientists strongly preferred thiscontractual option. The AF's industrialpartners echoed these sentiments. In theiropinion, the AF simplyhad to haveenough in-house capabilities to assimilateadvances, to writespecifications and to testnew weapon systems. n All thisled the AF to writecontracts for scientificservices, which implicifiy tied thesewell regarded private sector interests to theAF's political fortunes. Outsourcingbegan in earnest,when, in 1950,the AF separatedthe Air MaterialCommand's (AMC's) engineering division and transformed it into the Air Researchand DevelopmentCommand (ARDC). Now, researchand developmentoperated under one command,ARDC, and procurement, production,and logistics under a second,AMC [Putnam,1947, p. 4]. Likethe otherservices, the AF, foundit couldfocus scientific attention on particular problemsby supportinguniversity research centers, such as MIT's Lincoln Laboratories[Price, 1954, pp. 64-95].In caseswhere the problemsposed requiredno new knowledgebut expertapplication of knowntechniques, the AF reliedon privateresearch corporations. Douglas Aircraft Co.'s nonprofit spinoff,RAND Corp.,provides the classic example [B. Smith, 1968].

• Arthur E. Raymond,Vice Presidentin Chargeof Engineering,Douglas Aircraft Company,Inc. summarizedthe positionin an exchangewith SenatorMitchell, Special Committeeto Investigatethe National Defense Program: SenatorMitchell: But howare they (procurement officers) going to setthose requirementsand specifications?You presupposethat they are goingto awaitthe development of industryon thebasic research. Mr. Raymond:In largemeasure, yes. SenatorMitchell: They are going to dependupon industry. Mr. Raymond:In largemeasure, their settingsof requirementscome from evaluationthat theymake of the devicesthat are submittedplus their knowledgeof militarytactics and requirements. U.S.Senate, Investi•gation ofthe National De•nse Program: Hearings be•ro a SpedalCommittee Invesa'gatingtheNational De•nse Program, 79th Congress, 1st Session, July 18, 23, 24, 27, and31; August16, 18, 21, 22, 23, and 24, 1945 (Washington,DC: GPO, 1946).p. 15406.Mr. Raymonddid not advocatethat industryalone carry the researchburden. He recognized somegovernment agencies as credible research providers, for example,NACA. However,he considereduniversities as the primebasic research contractors. Industry took on develop- ment responsibilities.The militarywould manage these various providers through contrac- tuairelationships and a systemof coordinatingcommittees. 262 / AI.LEN KAUFMAN

By creatingthis voluntary network of researchcenters and corporations, the Air Forcemobilized research scientists to preservepeace by perfecting destruction.Once science became incorporated into the Air Force'sstrategy, air superiorityno longerdepended on quantitybut on quality,on information, yield,and accuracy.To secureair dominance,a nationhad to producea few highlycomplex defensive and offensive weapon systems. And, researchsoon crossedover into practicalsystems analysis for meldingcontractors' products intoviable defensive and offensive weapons. Such work required research and systemsengineering skills that went beyondthe AF's in-housemonitoring capabilities. Take the case of Lincoln Laboratories. After the Soviet Union detonated a nuclearbomb in 1949,the AF beganto work on a complexdefense system. To developthis system's equipment and operating techniques, the AF firsthad to solve numerousscientific and engineeringproblems. University-based scholarseagerly labored on these.Once solved,the AF requiredcompetent engineersto meld the variouscomponents into a workablesystem. The AF asked Lincoln Laboratories to take on this effort as a commercial venture. MIT, however,found that this foray into business jeopardized the its academic credibility.So, the AF foundeda governmentfunded nonprofit research center, MITRE [MITRE, 1979,pp. 1-21].The privatedesignation allowed the AF to recruitscientists and engineers from LincolnLabs and elsewhere at industry pay scalesand to placethese highly skilled employees in a university-style research environment. Offensiveaerial capabilities also increased in complexityas well as in destructiveyield. This broughtbatch production back to aviation.Unlike its earlierincarnation, this new production form requiredsystem engineering skills evento monitormanufacturing progress [Hughes, 1994, pp. 51-82;Hounshell, 1995].The AF unhappilylearned about this new complexitywhen delays occurredin themanufacture of jet aircraft.Whereas during World War II mass producedB-17s dependedon fitting standardizedparts into a varietyof aircraft,the new B-47 jet bomberdemanded specially designed, interdependent components[Knaack, 1988, pp. 101-112].Interdependency forced engineers andproduction managers to consideraerial weapons in systemand product lifecycleterms. The AF now had to plan and overseeseamlessly a weapon systemfrom its design through its manufacturing and operational phases. Organizationalsolutions to thesenew design and production problems ftrst came from the ARDC's WesternDivision, which was responsiblefor missiledevelopment. This taskposed two novelproblems. First, the AF could not contractwith a primeto undertakethis job, since no singlefirm had all the expertiseto buildthis system. Second, this undertaking's experimental nature cutacross functional and, more importantly, command lines. To solvethe first problem,the WesternDivision took the unprecedentedstep of directly employingan advisorto coordinatethe program.This contractor,Ramo- Woodbridge'sGuided Missile Division, later Space Technology Laboratories (STL),assembled a scientific and managerial team to integrateand oversee the project,a job thatWright-Patterson had done formerly. To solvethe second AMERICA'S PRIVATE ARSENAL FOR DEMOCRACY / 263 problem,the AF gavethe Westem Division's project manager extraordinary powers,including budgetary authority, to controlthe projectfrom its developmentto its operationalphase. This arrangementgave the project managerthe authorityto cut acrossARDC andAMC lines[Neufeld, 1990, pp. 65-118]. By the early1960s, this relianceon outsidecontractors to evaluate proposalsand overseeprojects became normal practice. In 1960, the AF advancedthe practiceby havingRW, now TRW after a ThomasProducts merger,sell STL to theAF. It reincorporatedSTL asa federallyfunded non- profitcorporation and renamed it Aerospace Corporation. Congresshad recommendedthis action.During late 1957 and early 1958,Congress had learnedhow the Air Force'sreliance on STL's system engineeringskills created conflicts of interests.Since STL's parent company hadcommercial relations with the AF, thispotentially gave TRW an unfair competitiveadvantage. To rectify this situation,the AF had explicitly prohibitedTRW from doingbusiness with the Air Force.TRW foundthis policytoo restrictive.And, sinceSTL was a TRW subsidiary,competitors resistedsharing information with STL out of fear that it leak proprietary informationto TRW. To resolvethese conflicts, the AF purchasedSTL. TheAir Forceprovided the initial capital and worked out transferterms for equipmentand personnel with TRW. Underits Californiaincorporation charter,Aerospace "engaged in scientificactivities and projectsfor, and...perform[ed]and engage[d]in research,development and advisory servicesto or for the UnitedStates Government" [as quoted in Aerospace Corporation,1980, p. 18].Aerospace had no capitalstock, nor could its efforts benefitindividuals. Instead, the firmserved the public interest. As a nonprofit organizationoffering the AF systemsmanagement services, Aerospace did not competedirectly with AF prime contractors.This lessenedAF contractor concernsabout sharing information with a potentialrival. In all,the Air Force carefullymanipulated the public/privatedistinction to createa hybrid organizationby whichto mobili•.escientists, engineers, and technicians into a civilian-militarycorps. As the AF reworkedits relationswith scienceand industry,the AF officercorps rethought its organizationalstructure to alignits operatingunits with modernsystems analysis procedures. In particular,the Air Forcefound the commanddivision between research (ARDC) and production(AMC) a substantialhindrance to weaponsprogram management. After a substantial review,the AF adoptedthe air missile program's structure that unified program managementunder a singleauthority. The AF createdan Air Systems Commandthat integrated applied research, development, and procurement into one operationalunit, and an Air LogisticsCommand that handled operational,supply and maintenance problems. The reformalso separated the AF Officeof AerospaceResearch as an independent unit that reported clirecfly to AF Headquarters. 264 / ALLEN KAUFMAN

The AF now had the strategyand structure to contractuallyassemble whatwe frequentlyrefer to asthe military industrial complex32 The AF cleverly manipulated,but neverviolated, the liberaldivide between public and private authorities.In so doing,AF procurementofficers could argue that they,along withcorporate managers, were democracy's steward and protector.

Conclusion

One mightask why I choseto characterizethis story as an exercisein intellectualhistory rather than as a syntheticeffort in businessgovernment relations.The answerhas to do with theinitial question that took me on my excursion:how did an expandedcold war AF comfortablyfit into a liberal order?Much of the analyticsfor answeringthis questionand relatedones ßconcerning the government'sregulatory authority over economic relationships drawheavily from political and economic discussions. Whether you prefer the right'sor the left'sdicta, their prescriptionfor writingthe regulatorystate's historyhas generic ingredients - liberty, equality, the law, markets, competition, and technology.For thosewho adoptthis strategy,intellectual history has shiftedfrom a studyof thefew who practice theory to a studyof themany who struggleto makeliberty a securepractice.

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