The Perils of `Defense Conversion'

FOR many on Capitol Hill, cutting defense spending has become a kind of superhero - able to finance pet projects in a single bound. But for congressmen with large defense contractors in their districts, defense cuts promise small peace dividends. In fact, the United States defense industry and the military could lose as many as 700,000 jobs during the next two years and double that number by 1996, according to recent estimates.

Hence the need for "defense conversion," concerted efforts to beat cold-war swords into plowshares for the new era. President-elect Clinton has rightly promised to make that a priority, but he must take great care lest defense conversion become the pork barrel of the 1990s.

The Bush administration has held that the government has no role to play in easing the impact of defense cuts. The market's magic is the best salve, it argues, citing America's speedy conversion and dramatic economic growth after World War II. Most wartime plants, however, had been switched from civilian production for the war; after the war most simply switched back. The postwar boom also eased the transition.

The post-Vietnam example of the 1970s, when defense contractors had grown far more dependent on government largesse, is more telling.

As defense outlays fell, several companies tried to branch out into civilian production, such as mass transit. Success was elusive, and the failures were impressive. Industry executives still recall Boeing Vertol's large cost overruns on its subway cars, or Grumman's unsuccessful venture into buses.

These large defense contractors had evolved into something very different from their civilian counterparts, which had to compete in the rough-and-tumble of an open marketplace. Defense suppliers have only one customer - the government - so they are not experienced with market research, mass distribution, or mass-producing low-cost items.

Instead, in response to comfortable cost-plus contracts and burdensome governmental bookkeeping requirements, many have developed unwieldy bureaucracies that favor uncertain new technologies. Without fundamental management changes, such firms are just as unlikely today to survive "conversion," be it government-directed or otherwise.

Mr. Clinton has said that worker retraining will be a central pillar of his national economic strategy. That makes good sense for defense workers, too, but Clinton has also showed signs of succumbing to less-enlightened fixes. Fearing job losses, Congress recently funded programs that the Pentagon said were no longer needed, programs like the expensive Seawolf submarine, designed to deter an all-but-gone Soviet threat. Clinton has said he supports building another Seawolf next year.

Congress has also provided funds through the Pentagon to help military firms produce civilian products, despite a 1990 study by the Arms Control and Disarmament Agency which concluded that "detailed research has not identified a successful product in our economy today which was developed through a military-to-civilian conversion approach."

For their part, many defense contractors - especially the larger ones - have been reluctant to move to civilian production, in spite of substantial defense budget cuts and the promise of more to come. They have been more interested in preserving profits than preserving jobs, and defense contracts can still be quite lucrative. The government cannot force these companies to be successful civilian competitors - and it should not try.

Instead, the Clinton administration would best serve defense workers - and the country - by seeing disappearing defense jobs as part of a larger challenge: converting the US economy to the global marketplace. The government must improve our transportation and environmental infrastructure; it must adopt an energy strategy that puts efficiency, not dependency, at its center; and, most of all, it must do a better job of helping workers sharpen the skills needed to compete in the economy's expanding sectors.

Clinton will have to be tough with Congress, resisting parochial pressures to preserve dying industries. As it approaches defense conversion - and the broader conversion to a global economy - the Clinton administration, to borrow its theme, should put people, not industries, first.