Military-Industrial Complex (MIC). The American Economy: A Historical Encyclopedia

Reciprocal relationship between government and industry.
Before 1945, America mobilized only after its wars began.
During the cold war, however, Soviet capability to launch a
surprise nuclear attack or to invade Western Europe required
America to maintain large, combat-ready military forces in
peacetime. The sum total of the academic, industrial, and
government institutions that evolved to meet the requirements of cold war deterrence and defense is called the
military-industrial complex (MIC). President Dwight D.
Eisenhower first used the term in his 1961 farewell speech
when he warned against excessive military and defense industry influence on the scientific world, academia, and
democratic processes. Some observers describe the MIC as an
“iron triangle” of beneficial relationships among the Defense
Department, legislators with jurisdiction over defense programs and budgets, and defense contractors.
Creating and improving qualitatively superior military
forces during the long cold war competition with the Soviets
required relentless scientific, technological, and engineering
innovation. To promote this innovation, the Defense Department sponsored basic and applied research, development,
testing, evaluation, and experimentation in academic and industrial laboratories. Government funding of American research and development (R&D) exceeded private industry
funding until the early 1980s, and defense generally dominated federal R&D funding after 1945, especially from 1945
until 1963. Defense research declined as a proportion of federal R&D after the Vietnam conflict, but jumped again (from
49 percent to 70 percent) between 1980 and 1987, largely because of research on the Strategic Defense Initiative (SDI),
which is a space-based system designed to destroy incoming
intercontinental ballistic missiles in space. Universities performed most of the basic defense research, and private industry conducted most of the applied research for SDI.
Defense-related industries consistently received about 80
percent of all federal funding for manufacturing R&D from
1945 to 2002, with most of the funds concentrated among the
largest contractors.
During the cold war, the U.S. government cooperated
closely with defense industries, funding plant construction,
providing guaranteed markets, protecting weak firms, and
promoting exports. The government cultivated an oligopolistic defense industry in which relatively few aerospace, electronics, and communications firms provided small numbers
of highly specialized products to a single customer that cared

more about quality than cost. Defense projects represented
about 6 to 10 percent of the private-sector workforce but employed more than half of the nation’s aerospace engineers
and one-quarter of all electrical engineers and physicists. Defense work also employed large numbers of highly skilled
blue-collar workers, particularly aircraft and electronics assemblers, machinists, metalworkers, shipfitters, and aircraft
mechanics.
Defense corporations usually hired retired military officers, who had excellent institutional knowledge and personal
contacts inside the military, to market to the Pentagon. Defense corporations subsidized lobbying groups and contributed heavily to selected political campaigns. In the 1990s,
defense lobbyists urged Congress to provide tax exemptions
for arms exporters, to issue government-backed loans to
countries importing American weapons, and to lift bans on
arms sales to repressive regimes. Defense corporations often
organized grassroots lobbying efforts for particular weapons
systems that were in danger of cancellation.
The MIC conferred numerous benefits on the American
economy and society. It created a military that deterred Soviet aggression and prevented nuclear war, and it ensured
American leadership in aerospace, computer, communications, and electronics technologies. Commercial products or
ventures that emerged from the MIC included jet engines,
widespread civil aviation after the invention of radar, lasers,
microchips, computers, satellites, robotics, and the Internet.
However, the MIC imposed enormous financial, political,
and environmental burdens on the nation. The MIC’s costs
impaired competitiveness in the post–cold war world and led
to government neglect of social programs and the civilian industrial base.
—James D. Perry
References
Adams, Gordon. The Iron Triangle. New Brunswick, NJ:
Transaction Books, 1982.
Hartung, William.
Corporate Welfare for Weapons Makers.
Washington, DC: Cato Institute, 1999.
Koistinen, Paul.
The Military-Industrial Complex. New York:
Praeger, 1980.
Markusen, Ann, and Joel Yudken.
Dismantling the Cold War
Economy.
New York: Basic Books, 1992.

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