To connote a somewhat sinister relationship, or worse, between the Department of Defense and its industrial suppliers, the phrase “military-industry complex” may he invoked.
However, all of industry has a role in supplying defense requirements, whether as an active participant or on call. Rather than conspiratorial gain, the element of indenture in industry's responsibility suggests that major companies engaged in defense contracting may soon alter their business emphasis in favor of civilian markets and that the industry stake in DOD as a market may become relatively smaller.
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References
1.
RaymondJack, “Growing Threat of Our Military-Industrial Complex,”Harvard Business Review, XLVI:3 (May-June 1968): “I am not suggesting that the threat of our industrial-military complex is based in any way on a military-industrial conspiracy … the economic threat … appears to reflect the familiar dangers of huge concentrations of economic power” (p. 64).
2.
Ibid., p. 556. Raymond expands on comments by Ex-President Dwight D. Eisenhower in his farewell address and memoirs.
3.
Fortune, LXXVII:7 (June 15, 1968), 186.
4.
The Appendix table furnishes a rough comparison of defense contractors awards and over-all company sales. The percentages derived must be taken as indicative of order of magnitude, rather than derivative. The Fortune sales data are reported by the companies on a calendar year basis or on the basis of the individual company fiscal years. These, of course, are not uniform bases for reporting, and it is unlikely that many of the Fortune 500 companies coincide with the government fiscal year accounting basis. In addition, sales are usually understood to mean billings, which for DOD contractors may occur in an accounting period succeeding the contract award, one to two years later, and for some activities, even later. Finally, the sales data for some companies active in defense contracting will include billings for subcontract work received from other, prime contractors. Naturally, the prime contract awards of second and lower tier contractors will not offset company billings when these are augmented by subcontract awards. On the other hand, no equivalent allowance is made for reducing the prime awards by the volume of subcontracting let by the prime contractor. Allowing for the various elements making for imprecision, it seems fair to assign order of magnitude validity only to comparisons between company prime contract awards and sales.
5.
Logistics Management Institute, Defense Industry Profit Review, LMI Task 66–25 (Nov. 1967), I.
6.
An element of auto-correlation appears to be introduced in comparing defense content with the FTC/SEC sample. Because the defense requirement supply base is industry-wide, elements of defense contracting may be expected in an index of 3,500 companies producing hardware like that bought on DOD. This suggests that even more disparate results in return on investment would follow a comparison of ROI in and out of defense if the data for activities out of defense were “pure.”
7.
Stanford Research Institute, The Industry-Government Aerospace Relationship, prepared for Aerospace Industry Association of America, Inc., Washington, D.C., SRI Project No. IS-4216 (May 1963), I, 38.
8.
KitchingJohn, “Why Do Mergers Miscarry?”Harvard Business Review, XLV:6 (Nov.-Dec. 1967), 84–101. The other forms and their incidence are vertical integration (3%), horizontal integration (25%), concentric marketing (13%), and concentric technology (15%).
9.
Government contracting has a literature unto itself. For a “partyline” view of the changes effected in recent years, see Commander William J. Ryan, SC, USN, “Problems and Promises of Weapons Acquisition Techniques of the 1960's,”Defense Industry Bulletin, IV:7 (July 1968).
