What are the long term national security consequences of transitioning from manufacturing to software and services?
The issue of maintaining — or, actually, not maintaining — technical capability in manufacturing is a classic tragedy of the commons problem. The new Bay Bridge is being built in China and shipped here in parts. it is much cheaper that way. California is quite rational to outsource the bridge. Now, it would be a bad thing if we forgot how to build bridges in the U.S. We might become totally reliant on other countries and not be able to build our own bridges in a war. But California’s decision does not make California (or any other state) substantially less safe immediately or even soon, because we can still build bridges today, and we’ll still be able to do so in ten years. It’s just that some large bridge-building firm in the U.S. and its suppliers lose one project and get a less practice and less revenue. The direct consequences of that, on a national scale, are minor. And that’s precisely the problem. No single decision has a big immediate national security effect, while the savin
I don’t believe it will have significant national security consequences. In this transition, I see a classic example of comparative advantage – countries specializing in the products they produce most efficiently, maximizing the value they create. To continue on Ben Golub’s bridge outsourcing example, the real issue is the value of having an organic bridge-building capability. For argument’s sake, let’s say we outsource all of our bridges to the point that we lose the expertise and facilities to build our own. We’ve lost the ability to build bridges ourselves, but have we lost the ability to get the bridges we want built? No! We pay someone to build those bridges with the value created by the products we produce most efficiently. If we were to allow a single country to gain a monopoly over bridge-building expertise and facilities, then we’d be in trouble. Withholding their services would be a very coercive policy tool to influence us. But that doesn’t mean the outsourcing of bridges is
I wanted to add a few thoughts to Ben Golub’s and Paul Denlinger’s insightful answers. I have recently become aware of a somewhat older, but still relevant article by Gary Pisano and Willy Shih (see power point presentation link) from the HBS that addresses the issue of the relationship between US competitiveness and its manufacturing capability. In essence being an industrial leader and creating an infrastructure for the creation of the higher jobs of the future will require maintaining a broad manufacturing infrastructure in critical technology, industrial, and defense industry products. In turn, this requires a manufacturing capability of critical components, and sub-assemblies which Pisano and Shih define as the “Industrial Commons.” The Industrial Commons is a key element for future innovations and economic growth. Pisano points out in his presentation that US manufacturing infrastructure has been eroding as a result of the short term financial metrics perspective (short term prof
Too, parts of the US government that work at high levels of security already ban the purchase of Lenovo and certain other computers and peripherals that are made in China. The assumption is that Chinese manufacturers will put in a back door that would compromise security. This may be over-caution, but security-minded folks don’t get fired for being over cautious. They do run samples of computers through checks for problems like this, but Chinese manufacture means that every single one would have to be checked. Easier to ban. These government offices have particular procurement procedures that cannot be flexed. They include things like banning USB ports on all equipment, no direct contact with the Internet, no unofficial equipment in secure offices, cell phones left in non-secure areas, etc.
