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What’s an Australian defence industry for? Part I

Posted By on May 20, 2013 @ 14:30

Oberon class HMAS Oxley sits in Fitzroy Dock at Cockatoo Island dockyard, in an Intermediate docking, 1970. [1]The Queensland government has recently appointed a defence envoy to bolster defence industries [2] in the state. In this it joins other states and the federal government in actively adopting defence industry sector strategies. But for strategies to be effective, they must be built on a clear understanding of the objectives sought. There are several different objectives that a defence industry strategy could be potentially optimised for. At the fundamental level this raises the question of what an Australian defence industry is for.

Where you stand on this issue may depend greatly on where you sit. In this post we’ll look at the federal level, leaving the state and company levels for later. The federal level comprises both the government as a political entity and below this the departmental levels, particularly Defence, Finance and Treasury.

At the political level there’s currently a focus on defence industry providing jobs—but not just any jobs, or indeed simply more jobs. Instead, the focus is on creating meaningful, well-skilled jobs in the manufacturing industry, as the current interest in naval shipbuilding [3] attests to. This is by no means an unworthy objective; philosophically, contemporary liberal thinking stresses improving the life of individuals—what else does a society exist for?

There are alternatives. Mercantilists [4] would argue rather than helping individuals, the aim should be building national ‘hard’ power. The national defence industry should primarily seek to create national wealth, as money is fungible [5] and can be used to increase national power in the most efficacious manner. A defence industry strategy would then be focussed on import substitution to the extent that it’s efficient, while exporting as much as possible.

In a different approach, some countries [6] might consider the number of jobs—not their type or value—to be the most important criteria. Having more people gainfully employed can be important for political stability and can help lower income disparities.

Taking a less insular view, countries can use their defence industries as diplomatic tools to build stronger links with other countries. In joining with others there are secondary benefits of economies of scale and sharing R&D costs, but the primary aim which informs the requisite compromises and tradeoffs is to build interdependencies and entrench good relationships. ASEAN member states are tentatively [7] (PDF) going down this path.

Of the departments of state, Treasury is charged to take a whole-of-economy view. An obvious market-centric strategy is to eschew interventionist industry strategies altogether, although current global troubles may commend a risk management alternative. With the global economy inherently prone to financial instability [8], having a balanced economy can provide greater resilience during the inevitable periodic economic crises. As one sector strikes trouble, another might improve, compensating for any downturn. Australia has strong primary and service industries and strengthening our relatively weak manufacturing sector, of which the defence industry is a significant part [9] (PDF, pages 26-28), might be advantageous in the next economic crisis.

Such a re-balancing logic underpins the UK government’s ‘Plan for Growth [10]‘ to return the country to economic health. In developing manufacturing [11] in today’s globalised world, being part of global supply chains is seen as essential. For several years, Australian defence industry has been able to access Government support for joining such supply chains [12]. This program has been relatively successful [13] in terms of developing Australian manufacturing although it’s of marginal value to Defence. Building F-18 rudder pedals [14] for example is undoubtedly good business, but of little importance for ADF operations.

The Defence Department has the luxury of being able to take a much more focussed approach in considering possible objectives for a defence industry strategy. Defence could potentially adopt an industry development strategy that sought to give ADF warfighters some unique capabilities that provide a distinct combat edge. US ‘black’ programs try to do this for American warfighters and, while some of these are very expensive, other niche areas like electronic or cyber warfare might be affordable. Such a defence industrial strategy almost by definition calls for supporting smart thinking rather than having deep pockets.

Defence has instead embraced strategies aimed at developing industry to maintain and sustain equipment purchased off-shore. There are two broad variations in this: build a national capability to be able to modify equipment on-shore to meet changing operational demands or, more simply, to just replace and sometimes fix broken equipment. The former was in vogue from the 1970s [15] (PDF, para 270–272) until about the first decade of the 21st century [16] (PDF, pages 5–6) when the capability development focus switched to new acquisitions and away from mid-life upgrades.

Over this time the argument has developed that the objective of an Australian defence industry strategy should be maximising ADF combat power and acquisition efficiency—getting the most bang for the defence buck. This idea was neatly encapsulated in the title of Andrew Davies recent blog post ‘Four ships for the price of six? [17]’ which examined the difference between buying from the most efficient overseas source versus building warships on-shore.

There’s a range of objectives that governmental defence industry strategies could be based on and choices have to be made between them. All objectives aren’t equal, and any strategy seeking to embrace several would most likely be incoherent, ineffective and inefficient. At the state and company levels though the objectives are subtly different again, as we’ll discuss next time.

Peter Layton is undertaking a research PhD in grand strategy at UNSW, and has been an associate professor of national security strategy at the US National Defense UniversityImage courtesy of Flickr user Kookaburra2011 [18].

Article printed from The Strategist: https://www.aspistrategist.org.au

URL to article: https://www.aspistrategist.org.au/whats-an-australian-defence-industry-for-part-i/

URLs in this post:

[1] Image: http://www.aspistrategist.org.au/wp-content/uploads/2013/05/6508811807_4180deb4fe_b.jpg

[2] bolster defence industries: http://statements.qld.gov.au/Statement/2013/3/11/strong-defence-industry-to-boost-economy

[3] naval shipbuilding: http://www.aspistrategist.org.au/a-boat-load-of-jobs-the-best-strategy-for-australia/

[4] Mercantilists: http://www.project-syndicate.org/commentary/the-return-of-mercantilism-by-dani-rodrik

[5] fungible: http://financial-dictionary.thefreedictionary.com/Fungible

[6] some countries: http://news.cbrnresourcenetwork.com/newsDetail.cfm?id=92

[7] tentatively: http://www.rsis.edu.sg/publications/Perspective/RSIS2322012.pdf

[8] financial instability: http://www.nber.org/papers/w15718

[9] defence industry is a significant part: http://www.defence.gov.au/dmo/id/dips/dips_2010.pdf

[10] Plan for Growth: http://cdn.hm-treasury.gov.uk/2011budget_growth.pdf

[11] developing manufacturing: http://www.deloitte.com/view/en_GX/global/industries/manufacturing/67d98ce7d114e310VgnVCM3000003456f70aRCRD.htm#.UYxQsyuOcng

[12] joining such supply chains: http://www.defence.gov.au/dmo/id/gsc/

[13] relatively successful: http://www.defence.gov.au/dmo/id/gsc/gscif.cfm

[14] F-18 rudder pedals: http://www.ferra.com.au/page/7/About_Ferra.html

[15] from the 1970s: http://www.defence.gov.au/strategicbasis/pdf/1975.pdf

[16] first decade of the 21st century: http://www.aspi.org.au/dcp_review_reading/industry_Discussion_Paper_2006.pdf

[17] Four ships for the price of six?: http://www.aspistrategist.org.au/four-ships-for-the-price-of-six/

[18] Kookaburra2011: http://www.flickr.com/photos/[email protected]/6508811807/

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