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End of WWII Model Shakes Up Aerospace Industry

Consolidated TB-32 bombers on the assembly line. Credit: U.S. Air Force photo

Efforts undertaken to arm the United States to fight as part of World War II are almost beyond criticism in American politics. It may be surprising to many of us then that the policies and efforts employed over 70 years ago still affect our industry today and are in many ways at the heart of the current malaise that is plaguing our domestic aerospace industry.  

Following World War I, the military was anxious to demobilize its forces rapidly as it had done after every war in the past. By 1920, many Americans clearly sought a return to quieter times and more traditional values. Politicians were also weary and carried their constituents’ sentiments to the House floor. The result was two decades of meager investment in military readiness and technology. During this period, the U.S. military relied upon advances in the commercial industry at large and adopted advances in aviation and electronics to meet its mission requirements as little military-funded technology development was to be had.  

On the eve of U.S. involvement in World War II, with war already raging in Europe, the U.S. military began rearming and supplying its allies in Europe to win against a technologically superior German army and air force. The priority for military funding in the early 1940s was building enough armaments to meet the challenge from Nazi Germany. As the war progressed, new military thinking emerged to develop technology as a response to German war technologies and their effectiveness on the battlefield. While sheer numbers of tanks, soldiers, planes and logistics eventually won the war in Europe, the development of the atomic bomb, radar, the jet engine, ballistic missiles and supersonic aircraft are legacies of World War II technology developments that would shape the next 65 years of government spending.

It’s hard to imagine today the sheer magnitude of the industrial efforts to manufacture armaments to meet our needs in the World War II theater. Automobile factories ceased manufacturing passenger cars in order to free up capacity to manufacture tanks, aircraft and weaponry on behalf of the federal government. Every industrial capacity that could be used by the U.S. government for war materiel production was employed. The government, for all intents and purposes, commandeered U.S. industry to win the war in Europe and Asia.  Given the Great Depression that preceded this era, nobody complained about having jobs and income to feed their families while the nation was at war. U.S. government debt rose, as a fraction of gross domestic product, to historic levels to fund this expanded production to levels comparable to what we see today.

After the war ended, the industrial capacity was converted back to civilian production. However, the scientific treasure recovered from Nazi Germany coupled with the evolving geopolitical threat from the Soviet Union fueled military-funded technology development. This had the effect of leaving a portion of the industrial conversion permanently in place. Companies such as Hughes and General Electric maintained a large postwar research-and-development (R&D) base to develop new weapons systems to remain one step ahead of the Soviets. In this sense, the industrial policy of the World War II U.S. military never really ended but evolved to fit the Cold War. NASA sprang into existence to contest the Soviets’ dominance in the exploration of space. 

This unprecedented level of funding continued unabated through three more decades. Its final crescendo was the Reagan military buildup of the 1980s, when missile defense was developed and the nation rearmed in a manner reminiscent of World War II. 

In 1991, the Soviet Union finally collapsed and this really ended the raison d’etre for the World War II industrial model that was again employed during the Reagan era. Saddam Hussein and his Iraqi army became the eventual and unfortunate recipient of a generation of weapons designed to destroy the Soviet army, adding an exclamation point to this period of history.

For the two decades following the demise of the Soviet Union, government funding struggled to find justification without the clear and present danger of an enemy such as the Soviets. The nation found that enemy on Sept. 11, 2001, and a new round of spending ensued. However, the United States had already piled up an enormous debt by this point in history and the two simultaneous Middle East wars ran up trillions of dollars in additional debt that the nation could ill afford. The prosecution of the Iraq and Afghan wars continued and new technology funding flowed unabated until 2008, when a burgeoning private debt crisis that eerily mirrored the government debt crisis exploded and plunged the nation into an economic crisis not seen since the Great Depression. Many of us in the industry sensed that something fundamental was about to change when this crisis broke, but few of us appreciated the profound change that it was bringing.

The economic crisis that has plagued the nation for five years now has finally broken the U.S. World War II industrial model of government-commercial collaboration. The U.S. government is experiencing unprecedented budget deficits and can ill afford to continue spending vast amounts of money it does not have on new technology development. The dreaded term “sequestration” and the budget austerity that it implies are a force here to stay for at least a decade.

Natural sociological and economic forces are forcing NASA and the defense technology complex to return to the model they had prior to World War II in which government-funded R&D was indeed sparse. As before World War II, the U.S. government will be forced to rely upon inventors and technology developed in the private sector and adopted to the military and government needs. 

Without casting judgment on the policies of the past, World War II and the extended Cold War that followed turned the natural economic order and U.S. industrial model upside-down where entire industries were converted into arms of the U.S. military and the U.S. government itself. While this was necessary to win the war, the reverse transformation, or demobilization, was never really achieved. During the Cold War, our post-World War II global economic dominance was due in part to the fact that we had destroyed most of the world’s industrial capacity and we could dominate industrial economic spheres for the next 50 years. The Cold War was underwritten by this economic dominance and allowed the World War II industrial model to remain intact. The economic collapse of 2008 was inevitable when overspending in the United States and the world’s reindustrialization caught up. The permanent loss in tax revenue from the market housing bubble collapse is putting pressure on spending, and the debt servicing is multiplying this pressure. The U.S. government has no way out other than cutting spending.

So, what should we expect in the next 10 years? I, for one, am optimistic and believe in the spirit and power of capitalism and its ability to efficiently deploy capital, innovate and produce value. Our aerospace industry will change and adapt to this new reality and the U.S. government will find new ways to harness the more efficient capital deployment of the private sector. 

Witness a superb example: Space Exploration Technologies Corp. (SpaceX). SpaceX has spent less than $1 billion in capital since its founding in 2001 and has launched five successful Evolved Expendable Launch Vehicle-class vehicles (Falcon 9), five Falcon 1 vehicles and four Dragon crew capsules, and built three launch pads. A part of this capital came from the U.S. government (about $600 million), but it was implemented by the private sector and its deployment was without a doubt a pure venture capital approach. 

Without entering into all of the arguments about crew safety and standards, it’s hard to argue that this is not a more efficient deployment of capital than that of the Constellation program. Constellation spent several multiples of this number, well over $12 billion, on its launch vehicle and crew vehicle system and only succeeded in launching one suborbital rocket. 

The SpaceX experience is in many ways a model for how I see the next decade unfolding. “New space,” as some call it, represents the hopes, ingenuity and capital of investors to do what formerly was considered the sole domain of the government. Companies such as Moon Express, Skybox Imaging and Iridium Communications are all shining examples of what can be done. For me the future is bright and will be led by those willing to take the risks and put skin in the game like the “new space” companies are. In the meantime, the government R&D community is taking it on the chin and the World War II industrial relationship is going into the garbage bin of history.

 

Jim Cantrell is president and chief executive of Strategic Space Development, an aerospace and technology consulting firm based in Tucson, Ariz.

Article Comments

Thanks for the insightful comments. NASA has finally acknowledged that the "commercial" space approach can drastically cut, by 90%(!), the development costs to government for space projects:

The Commercial Leverage Model and Public/Private Partnerships.
Daniel J. Rasky
Director, Emerging Commercial Space Office
NASA Ames Research Center
Founder & Director, Space Portal
NASA Research Park
Moffett Field, CA 9403
September 11, 2013
https://dl.dropboxusercontent.com/u/47645641/AIAA_2013.pptx

Bob Clark

This opinion is frightening. The author ignores the significant success of the current approach. In contrast to the pre-WW II days that the author mentions, the US is now preeminent in aerospace technology. Over the past 55 years, during which time this model has been operating, we have avoided being dragged into cataclysmic world wars that killed millions of our citizens. Abandoning government R&D will return the US to a period when our aerospace technology lags behind other countries. This would be to our extreme detriment. I applaud the success of "new space" and of more private sector investment. However, it is unlikely that venture capitalism will guarantee US preeminence in aerospace technology, particularly in light of large government investments in other countries. I doubt the public wants to go back to the Sputnik era when our technology was lagging. New space should flourish, but relegating government R&D to the "garbage bin" of history is not a wise direction.

What is frightening is the inability of some to recognise and acknowledge that the world has changed, that there is no 'Red Menace', and that there are benefits that private sector models can bring to the space industry. Government investment is inefficient and highly wasteful of tax-dollars. It is seen as a never-ending source of funding by R&D organisations - a dripping faucet - and a lack of robust oversight has allowed exploitation of the system, leading to cost-overruns and performance shortfalls. The article is not asking the government to abandon R&D: it is saying that the old - cold-war legacy - model of R&D, where a bulldozer pushes a bigger wall of money at a problem than the opposition can, is not sustainable. Not sustainable, meaning it will contribute to the decline and fall of the USA if allowed to continue. The orbital portion of the big-ticket Constellation program was superseded by a more cost-effective commercial-partnership model, with the whole project subsequently shelved (for being "over budget, behind schedule, and lacking in innovation"), but the program's raison-d'etre remains. Other government-funded R&D efforts continue. Hopefully, if they cannot be shown to generate a benefit within a limited time and budget, they too will be cancelled. Technology research has to have a purpose and an aim, otherwise it is just speculative auto-fellation. This is fundamental to why the US responded to Sputnik and landed on the Moon first (there was a timetable and a political will to reach it - just like in the Second World War, everyone was aligned toward the same objective) and why today's Chinese, Indian and Russian space programs will not seriously threaten the present US hegemony. The interest of today's international bodies in space is fractured and short-term. They are basically in it to make money from lofting satellites and keeping the ISS alive, but no-one is yet trying to score political points by racing to get to Mars or to extract wealth from the Moon. Those are the kind of scenarios which will drive innovation and real progress. If such a program were to be pursued, then I would expect the government to lead the way with R&D bursaries and incentives. Meanwhile, commercial "new space" is interested in a venture capitalist model of "let's not wait for the nation to get behind us, let's just get there and see what happens!"

I'm very far from knowing ‘economics’ nor in the capacity to discuss ‘capitalism,’ but I liver over 60 years and I see in ‘capitalism’ what I saw in my own life.

In the young days, we have ‘ideals’ and work hard about them. Same in capitalism, beginning of the century.

In the middle ages and with great challenges we give our best. Capitalism: WWII.

In the older days, our interest goes mor e to stability, retirement and less risks.
I think that this what has happened with the industrial-military complex.
Boeing & als —and all the established companies— ‘arrange’ things to take less risks (I'm thinking of the launching contracts).

In the other hand, internet companies are ‘younger’ than the military/oil/automaker/etc. industries and seem to me to show a more ‘younger’ capitalism.

As I said, I do not know if somebody already studied ‘age evolution’ of capitalism, but it seems to me that this can explain the position shown in the article.

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