The Middle of Nowhere

The middle of nowhere
Edward Luttwak

Western analysts are forever bleating about the strategic importance of the middle east. But despite its oil, this backward region is less relevant than ever, and it would be better for everyone if the rest of the world learned to ignore it

http://www.prospect-magazine.co.uk/article_details.php?id=9302

Why are middle east experts so unfailingly wrong? The lesson of history is that men never learn from history, but middle east experts, like the rest of us, should at least learn from their past mistakes. Instead, they just keep repeating them.

The first mistake is "five minutes to midnight" catastrophism. The late King Hussein of Jordan was the undisputed master of this genre. Wearing his gravest aspect, he would warn us that with patience finally exhausted the Arab-Israeli conflict was about to explode, that all past conflicts would be dwarfed by what was about to happen unless, unless… And then came the remedy—usually something rather tame when compared with the immense catastrophe predicted, such as resuming this or that stalled negotiation, or getting an American envoy to the scene to make the usual promises to the Palestinians and apply the usual pressures on Israel. We read versions of the standard King Hussein speech in countless newspaper columns, hear identical invocations in the grindingly repetitive radio and television appearances of the usual middle east experts, and are now faced with Hussein's son Abdullah periodically repeating his father's speech almost verbatim.

What actually happens at each of these "moments of truth"—and we may be approaching another one—is nothing much; only the same old cyclical conflict which always restarts when peace is about to break out, and always dampens down when the violence becomes intense enough. The ease of filming and reporting out of safe and comfortable Israeli hotels inflates the media coverage of every minor affray. But humanitarians should note that the dead from Jewish-Palestinian fighting since 1921 amount to fewer than 100,000—about as many as are killed in a season of conflict in Darfur.

Strategically, the Arab-Israeli conflict has been almost irrelevant since the end of the cold war. And as for the impact of the conflict on oil prices, it was powerful in 1973 when the Saudis declared embargoes and cut production, but that was the first and last time that the "oil weapon" was wielded. For decades now, the largest Arab oil producers have publicly foresworn any linkage between politics and pricing, and an embargo would be a disaster for their oil-revenue dependent economies. In any case, the relationship between turmoil in the middle east and oil prices is far from straightforward. As Philip Auerswald recently noted in the American Interest, between 1981 and 1999—a period when a fundamentalist regime consolidated power in Iran, Iran and Iraq fought an eight-year war within view of oil and gas installations, the Gulf war came and went and the first Palestinian intifada raged—oil prices, adjusted for inflation, actually fell. And global dependence on middle eastern oil is declining: today the region produces under 30 per cent of the world's crude oil, compared to almost 40 per cent in 1974-75. In 2005 17 per cent of American oil imports came from the Gulf, compared to 28 per cent in 1975, and President Bush used his 2006 state of the union address to announce his intention of cutting US oil imports from the middle east by three quarters by 2025.

Yes, it would be nice if Israelis and Palestinians could settle their differences, but it would do little or nothing to calm the other conflicts in the middle east from Algeria to Iraq, or to stop Muslim-Hindu violence in Kashmir, Muslim-Christian violence in Indonesia and the Philippines, Muslim-Buddhist violence in Thailand, Muslim-animist violence in Sudan, Muslim-Igbo violence in Nigeria, Muslim-Muscovite violence in Chechnya, or the different varieties of inter-Muslim violence between traditionalists and Islamists, and between Sunnis and Shia, nor would it assuage the perfectly understandable hostility of convinced Islamists towards the transgressive west that relentlessly invades their minds, and sometimes their countries.

Arab-Israeli catastrophism is wrong twice over, first because the conflict is contained within rather narrow boundaries, and second because the Levant is just not that important any more.

The second repeated mistake is the Mussolini syndrome. Contemporary documents prove beyond any doubt what is now hard to credit: serious people, including British and French military chiefs, accepted Mussolini's claims to great power status because they believed that he had serious armed forces at his command. His army divisions, battleships and air squadrons were dutifully counted to assess Italian military power, making some allowance for their lack of the most modern weapons but not for their more fundamental refusal to fight in earnest. Having conceded Ethiopia to win over Mussolini, only to lose him to Hitler as soon as the fighting started, the British discovered that the Italian forces quickly crumbled in combat. It could not be otherwise, because most Italian soldiers were unwilling conscripts from the one-mule peasantry of the south or the almost equally miserable sharecropping villages of the north.

Exactly the same mistake keeps being made by the fraternity of middle east experts. They persistently attribute real military strength to backward societies whose populations can sustain excellent insurgencies but not modern military forces.

In the 1960s, it was Nasser's Egypt that was mistaken for a real military power just because it had received many aircraft, tanks and guns from the Soviet Union, and had many army divisions and air squadrons. In May 1967, on the eve of war, many agreed with the prediction of Field Marshal Montgomery, then revisiting the El Alamein battlefield, that the Egyptians would defeat the Israelis forthwith; even the more cautious never anticipated that the former would be utterly defeated by the latter in just a few days. In 1973, with much more drama, it still took only three weeks to reach the same outcome.

In 1990 it was the turn of Iraq to be hugely overestimated as a military power. Saddam Hussein had more equipment than Nasser ever accumulated, and could boast of having defeated much more populous Iran after eight years of war. In the months before the Gulf war, there was much anxious speculation about the size of the Iraqi army—again, the divisions and regiments were dutifully counted as if they were German divisions on the eve of D-day, with a separate count of the "elite" Republican Guards, not to mention the "super-elite" Special Republican Guards—and it was feared that Iraq's bombproof aircraft shelters and deep bunkers would survive any air attack.

That much of this was believed at some level we know from the magnitude of the coalition armies that were laboriously assembled, including 575,000 US troops, 43,000 British, 14,663 French and 4,500 Canadian, and which incidentally constituted the sacrilegious infidel presence on Arabian soil that set off Osama bin Laden on his quest for revenge. In the event, two weeks of precision bombing were enough to paralyse Saddam's entire war machine, which scarcely tried to resist the ponderous ground offensive when it came. At no point did the Iraqi air force try to fight, and all those tanks that were painstakingly counted served mostly for target practice. A real army would have continued to resist for weeks or months in the dug-in positions in Kuwait, even without air cover, but Saddam's army was the usual middle eastern façade without fighting substance.

Now the Mussolini syndrome is at work over Iran. All the symptoms are present, including tabulated lists of Iran's warships, despite the fact that most are over 30 years old; of combat aircraft, many of which (F-4s, Mirages, F-5s, F-14s) have not flown in years for lack of spare parts; and of divisions and brigades that are so only in name. There are awed descriptions of the Pasdaran revolutionary guards, inevitably described as "elite," who do indeed strut around as if they have won many a war, but who have actually fought only one—against Iraq, which they lost. As for Iran's claim to have defeated Israel by Hizbullah proxy in last year's affray, the publicity was excellent but the substance went the other way, with roughly 25 per cent of the best-trained men dead, which explains the tomb-like silence and immobility of the once rumbustious Hizbullah ever since the ceasefire.

Then there is the new light cavalry of Iranian terrorism that is invoked to frighten us if all else fails. The usual middle east experts now explain that if we annoy the ayatollahs, they will unleash terrorists who will devastate our lives, even though 30 years of "death to America" invocations and vast sums spent on maintaining a special international terrorism department have produced only one major bombing in Saudi Arabia, in 1996, and two in the most permissive environment of Buenos Aires, in 1992 and 1994, along with some assassinations of exiles in Europe.

It is true enough that if Iran's nuclear installations are bombed in some overnight raid, there is likely to be some retaliation, but we live in fortunate times in which we have only the irritant of terrorism instead of world wars to worry about—and Iran's added contribution is not likely to leave much of an impression. There may be good reasons for not attacking Iran's nuclear sites—including the very slow and uncertain progress of its uranium enrichment effort—but its ability to strike back is not one of them. Even the seemingly fragile tanker traffic down the Gulf and through the straits of Hormuz is not as vulnerable as it seems—Iran and Iraq have both tried to attack it many times without much success, and this time the US navy stands ready to destroy any airstrip or jetty from which attacks are launched.

As for the claim that the "Iranians" are united in patriotic support for the nuclear programme, no such nationality even exists. Out of Iran's population of 70m or so, 51 per cent are ethnically Persian, 24 per cent are Turks ("Azeris" is the regime's term), with other minorities comprising the remaining quarter. Many of Iran's 16-17m Turks are in revolt against Persian cultural imperialism; its 5-6m Kurds have started a serious insurgency; the Arab minority detonates bombs in Ahvaz; and Baluch tribesmen attack gendarmes and revolutionary guards. If some 40 per cent of the British population were engaged in separatist struggles of varying intensity, nobody would claim that it was firmly united around the London government. On top of this, many of the Persian majority oppose the theocratic regime, either because they have become post-Islamic in reaction to its many prohibitions, or because they are Sufis, whom the regime now persecutes almost as much as the small Baha'i minority. So let us have no more reports from Tehran stressing the country's national unity. Persian nationalism is a minority position in a country where half the population is not even Persian. In our times, multinational states either decentralise or break up more or less violently; Iran is not decentralising, so its future seems highly predictable, while in the present not much cohesion under attack is to be expected.

The third and greatest error repeated by middle east experts of all persuasions, by Arabophiles and Arabophobes alike, by Turcologists and by Iranists, is also the simplest to define. It is the very odd belief that these ancient nations are highly malleable. Hardliners keep suggesting that with a bit of well-aimed violence ("the Arabs only understand force") compliance will be obtained. But what happens every time is an increase in hostility; defeat is followed not by collaboration, but by sullen non-cooperation and active resistance too. It is not hard to defeat Arab countries, but it is mostly useless. Violence can work to destroy dangerous weapons but not to induce desired changes in behaviour.

Softliners make exactly the same mistake in reverse. They keep arguing that if only this or that concession were made, if only their policies were followed through to the end and respect shown, or simulated, hostility would cease and a warm Mediterranean amity would emerge. Yet even the most thinly qualified of middle east experts must know that Islam, as with any other civilisation, comprehends the sum total of human life, and that unlike some others it promises superiority in all things for its believers, so that the scientific and technological and cultural backwardness of the lands of Islam generates a constantly renewed sense of humiliation and of civilisational defeat. That fully explains the ubiquity of Muslim violence, and reveals the futility of the palliatives urged by the softliners.

The operational mistake that middle east experts keep making is the failure to recognise that backward societies must be left alone, as the French now wisely leave Corsica to its own devices, as the Italians quietly learned to do in Sicily, once they recognised that maxi-trials merely handed over control to a newer and smarter mafia of doctors and lawyers. With neither invasions nor friendly engagements, the peoples of the middle east should finally be allowed to have their own history—the one thing that middle east experts of all stripes seem determined to deny them.

That brings us to the mistake that the rest of us make. We devote far too much attention to the middle east, a mostly stagnant region where almost nothing is created in science or the arts—excluding Israel, per capita patent production of countries in the middle east is one fifth that of sub-Saharan Africa. The people of the middle east (only about five per cent of the world's population) are remarkably unproductive, with a high proportion not in the labour force at all. Not many of us would care to work if we were citizens of Abu Dhabi, with lots of oil money for very few citizens. But Saudi Arabia's 27m inhabitants also live largely off the oil revenues that trickle down to them, leaving most of the work to foreign technicians and labourers: even with high oil prices, Saudi Arabia's annual per capita income, at $14,000, is only about half that of oil-free Israel.

Saudi Arabia has a good excuse, for it was a land of oasis hand-farmers and Bedouin pastoralists who cannot be expected to become captains of industry in a mere 50 years. Much more striking is the oil parasitism of once much more accomplished Iran. It exports only 2.5m barrels a day as compared to Saudi Arabia's 8m, yet oil still accounts for 80 per cent of Iran's exports because its agriculture and industry have become so unproductive.

The middle east was once the world's most advanced region, but these days its biggest industries are extravagant consumption and the venting of resentment. According to the UN's 2004 Arab human development report, the region boasts the second lowest adult literacy rate in the world (after sub-Saharan Africa) at just 63 per cent. Its dependence on oil means that manufactured goods account for just 17 per cent of exports, compared to a global average of 78 per cent. Moreover, despite its oil wealth, the entire middle east generated under 4 per cent of global GDP in 2006—less than Germany.

Unless compelled by immediate danger, we should therefore focus on the old and new lands of creation in Europe and America, in India and east Asia—places where hard-working populations are looking ahead instead of dreaming of the past

Breaking The Bank

It is widely understood that the sophistication and capabilities of electronic products have been increasing much faster than their cost. Ever since the first Texas Instruments calculators, consumers have experienced steadily increasing performance from personal computers and a host of other products such as TVs and GPS equipment, while their unit cost has not increased in proportion, and in some cases has fallen.

Buyers know that the true cost of most electronic equipment, and not just computers, has declined more or less in accordance with the so-called Grosch’s Law: The cost of computing systems increases as the square root of their computational power. In other words, a buyer will get exponentially more performance bang for each additional buck spent on a computer or any gadget with a computer in it.

Now, since electronic systems, sub-systems and components account for an increasing proportion of all weapons platforms from armed helicopters to warships, it follows that, other things being equal, their unit cost should be declining rapidly courtesy of Grosch’s Law. Instead the very opposite is the case: Unit costs in each and every category—combat aircraft, warships, armored fighting vehicles, air-defense radars and the rest—continue to increase. Evidently, other things are not equal. But what things?

First, we must set aside a common but erroneous presumption: the belief that the high cost of military equipment is caused mainly by the oligopolistic nature of military industries—or as they prefer to call themselves, the military aerospace and defense industry. Because relatively few governments buy major military platforms from relatively few large manufacturers, the result is that the normal cost-constraining function of the free market is absent from military purchasing. Contractors can thus charge pretty much whatever they want, it is said, a process presumably facilitated by “revolving door” relationships between the services and their major contractors.

This line of reasoning is popular but explains much less than one would think. Oligopoly there certainly is; competition is weak even in the United States and almost absent in Europe, where national, bi-national or tri-national conglomerates simply own their respective home markets. But inefficiency is not extreme because there is so much scrutiny, starting with the military buyers themselves who need their aircraft to fly and their missiles to hit their targets, while monopolistic extortion is resisted by the U.S. Congress and even by European parliaments. That is why all long-term comparisons show that military industries are not especially profitable. They have done well out of the post-2001 build-up, but they did poorly before that and will no doubt do poorly again when the Iraq war winds down. Many investors systematically avoid military aerospace and defense stocks for the same reason they avoid airline stocks: the glamour greatly exceeds the returns on equity.

The Procurement Paradox

The most obvious real cause of increasing unit costs is the decline in the production rates of weapon systems, which generates negative economies of scale. That decline has been drastic, and so have been the industrial consequences.

Weapon systems were once truly industrial products, mass-produced for the most part, except for oddities like giant, rail-mounted guns. As in all forms of manufacturing, the efficiency of production was increased by investing in more dedicated as opposed to generic assembly lines or batch-production infrastructures, in more automated machinery, more specialized tooling, and in other ways of replacing labor with capital equipment. Even in wartime conditions, when monetary savings are of secondary importance, the efficiency of highly capitalized mass production was still valued, because it increased the supply of weapons and the homogeneity of their performance. Millions of identical rifles produced by assembly-line workers are more valuable to a mass force than individual match-grade weapons forged by highly skilled gunsmiths. Even if budgets were not significantly limited, the supply of skilled labor was, which is what the highly capitalized plant replaced most advantageously. Only the limitations of available production technologies set final limits at any one time on the substitution of capital for labor.

These days, advanced production technologies allow labor-saving investments up to the limit of fully robotic plants, which require labor only for maintenance, not operation. But because so few weapon systems of any given type are purchased, very little investment in advanced production-plant technologies can be economical. In contrast to civilian industry, in which IT-controlled plants and equipment can produce customized as well as classic mass-produced items, most weapon systems are almost entirely made by hand, with a profligate use of costly skilled labor. That in turn generates additional costs: Humans are less reliable than machines, so the greater the manual content of production, the greater the potential for manufacturing errors that require repairs or replacement, or that simply cause disruptive delays.

The contrast between a typical military production plant and its typical civilian counterpart is stark—for example, between armored-combat vehicle factories and ordinary automotive plants. The former consist mostly of empty space within which highly skilled workers can get under, over and inside the combat vehicles as they are assembled one by one. The latter consist of a production line densely packed with automated machinery. A production capacity of 100,000 per year is more or less a minimum for an automobile plant, and 10,000 per year would not be much at all for a truck plant. Yet no armored vehicle is produced in such numbers. Indeed, these numbers exceed typical total production runs of armored vehicles over a period of many years.

The example of fighter jets, illustrated in Table 1, shows the changes in production rates and the implied potential for economies of scale. Even these data, however, overstate the economies of scale that have been obtainable as time has passed, because they ignore the effect of modifications and upgrades introduced to overcome anticipated obsolescence. Each upgrade imposed its own learning curve and caused a temporary loss of production efficiency. The differences between the (Block 1) F-16s of 1978 and the (Block 50/52) F-16s of 2006, for example, are so great that they are scarcely the same aircraft. They certainly have much less in common with each other than did the first and last versions of the Spitfire or Messerschmitt Bf 109.

Nor are fighter aircraft the most extreme case from the viewpoint of diminished production rates and resulting inefficiencies. Bombers are worse still; armored vehicles are worse than bombers; and tanks are worse than armored vehicles—not to mention ships for the Navy.

So the explanation seems simple, and a remedy impossible. If the unit cost of weapon systems continues to increase because too few are purchased for economies of scale to be brought to bear, then the only solution is to produce more of them. But not even the U.S. military could pay for 15,586 F-35 Joint Strike Fighters, an infinitely more elaborate aircraft than the P-51 Mustang ever was. Nor could the Air Force begin to absorb them into any rational order of battle. The Army cannot afford nor use 21,231 Abrams tanks, whose armor and systems are far more elaborate than those of the M4 Sherman tank—which brings us to a second, related thing that is not equal.

The unit costs of weapon systems have continued to increase not just because fewer and fewer are acquired, but also because of their increasing complexity. A vicious circle has long been at work, starting with the recognition that weapon systems are so expensive that few can be acquired. It continues with the reasoning that if few weapon systems can be acquired, those that are acquired must deliver superior performance. To do that, however, requires both macro- and micro-innovations that are costly, so costly that those innovations make weapons even more expensive—so that even fewer are acquired, and so on and on we have gone.

That is not all: The circle has really been a downward spiral from the 1950s to the present, because the time needed to bring innovations into production has expanded, as well. Weapons that will not be fielded for many years must promise even higher performance to hedge against the uncertainties of what competitors might devise. That increases innovation costs, further reducing acquisition numbers and further raising per-unit costs.

Taken together, problems of scale and complexity define the procurement paradox: We have ever more sophisticated weapons, but so few in number because of cost that overall capabilities either stay the same, decrease, or become simply incalculable against novel changes in the threat environment.

Prisoners of Tradition

The procurement paradox, thus defined, explains a great deal about the rising per-unit costs of major military platforms. But it does not explain everything. Often overlooked by those close to the procurement process, and almost completely opaque to most policy officials high and low, are the hidden costs inflicted by the astounding persistence of traditional weapon configurations.

There have been many wars and much technological advancement since 1945, but nothing as revolutionary as a prolonged world war has fully engaged the energies and talents of the developed countries to overthrow old paradigms of war-fighting. The result is that the canonical weapons platforms and configurations of World War II have endured, despite all the new possibilities opened by technological advancements in the past six decades.

The old configurations were a good fit for the technology of 1945. Today, they have become obstacles to military advancement, severely compounding the procurement paradox. Instead of shaping new platform and weapon configurations to fit today’s information technology, communications, sensor and guidance equipment, we are shoving, cramming and molding such technology to fit into the nooks and crannies of 1945-era platforms. Moreover, those traditional platforms mostly retain their 1945 character as autonomously operating units, even though in war they would always operate in groups of near-identical platforms and, increasingly likely, in joint configurations with other kinds of platforms.

For example, airborne radars, including the latest Active Electronically Scanned Arrays, are perhaps a hundred times as expensive pound for pound as even the most elaborate high-definition television sets. But what makes them almost a thousand times more expensive is the need to miniaturize and package the new radars so that they will fit into the nose-cone of fighter aircraft designed for aerodynamic optimality rather than to accommodate equipment as elaborate as today’s best radars.

Given the potentially revolutionary combat value of the new radars, which can not only detect, acquire and track multiple targets but also attack electronic circuitry with highly focused beams, combat aircraft should be designed around them, not the other way around. Even greater cost-effectiveness could be achieved if ensembles of dissimilar combat aircraft were designed around the new technology, some with their own full-scale radars, others with a greater weapons load, others still equipped for defense suppression and so on. We are not doing this. Instead, the latest variants of the F-18 and F-15 aircraft have one radar set, old or new, per nose-cone, just as it was with mechanically scanned radars more than thirty years ago, and just as it was with the first radar-equipped fighters of World War II. Things are no different with the new F-22, and the F-35 Joint Strike Fighter, the future combat aircraft of many air forces. In those designs, as well, the new radar must fit wherever there happens to be room for it, in an aircraft designed according to impeccably traditional, and decreasingly consequential, aerodynamic criteria.

Today’s advanced airborne radar sets are not a unique example. The same is true of most other new equipment and of most platforms. Instead of providing suitable and economical new forms into which the new content can best be accommodated, operated and maintained, the new content is expensively miniaturized, fragmented and contorted so that it can fit into the old classic forms. This not only greatly increases costs; it also constrains effectiveness.

For all the heady talk of advancement and breakthrough technologies, the 1945 platforms have proven amazingly persistent, probably for an entirely irrational, albeit compelling, reason: fond memories of their central role in the war that remains emblematic for the few countries that design, develop and produce the world’s major weapon systems. Whatever the ultimate explanation, the facts are undeniable, as three case studies illustrate: fighter aircraft, tanks and aircraft carriers.


Fighter Aircraft: There were no dedicated fighter aircraft in 1914; only a variety of biplanes (and a triplane or two), none armed. Thanks to the crucible of two world wars, a mere thirty years later an all-metal, jet-propelled monoplane fighter (the Messerschmitt 262) was flying in combat service.

More than sixty years later, in 2007, instead of even more drastic changes to accommodate the IT revolution, networked communications, new sensor technology and so forth, the 1944 configuration has not changed at all. All current and upcoming fighters—the F-15, F-16, F-18, F-22, F-35 JSF, Jaguar, Gripen, Eurofighter, Rafale, MiG-29 and Su-27/30—perpetuate the Me 262 configuration. All feature aerodynamically optimized forms, one or two aircrew, one or two engines and full sets of sensors for self-sufficient operation in both air-to-air and air-to-ground missions (despite the fact that a single fighter aircraft would only ever fly on its own in the immediate aftermath of a very unsuccessful combat operation).

Nobody could ever confuse a 1914 biplane with the Me 262 after thirty years of macro innovation, but after more than sixty years of post-1945 conservatism, only experts and enthusiasts would immediately categorize the Me 262 as anything other than a contemporary aircraft.

Even more important than mere appearance, today’s fighters perpetuate a 1945 conception of air power that views the fighter pilot as an airborne knight with all his weapons on his flying horse, ready to battle the enemy on his own (or sometimes with a second crewman to play the loyal squire). From this conception follows the homogeneity principle: Aircraft of any one type are all equipped the same way, without any effort at task-force optimization—again, despite the fact that fighter aircraft are never sent into action on their own.


Main Battle Tanks: There were no armored fighting vehicles in 1914 except for a handful of very lightly armored cars; for the rest, soldiers only had wheeled trucks and some tractors, none armored or armed. Only thirty years later, the heavily armored main battle tank—manned by a four- or five-man crew and armed with a high-velocity, long-barreled gun in a rotating turret (T-34, Sherman, Tiger)—was operating on a large scale.

More than sixty years later, in 2007, instead of drastic platform innovation to respond to the proliferation of light, armor-piercing weapons and of surface-to-surface missiles, today’s main battle tanks—the M1, T-80, Leopard, AMX-50 and the rest—can all still be easily confused with a Panzerkampfwagen VI Sd.Kfz 182 (“King Tiger”) of 1944. And all still rely on a rotating high-velocity turret gun as their main armament, as if guided missiles had never been invented.

In other respects, too, post-1945 improvements to tanks have only been incremental—not revolutionary, as they were in the tanks of 1944 as compared to those of 1918. Yes, today’s composite armor is more resistant to kinetic penetration than the armor of 1944, pound for pound, but the difference is not qualitative. Acceleration on the battlefield can be somewhat higher, too, because of better suspensions, but it is the difference in fire-control sub-systems that really counts: If potential first-round hit probabilities go way up, acceleration becomes less important. But those sub-systems are expensively and poorly accommodated in modern tanks, which still replicate the canonical World War II configuration, no matter what else about the battlefield has changed.

The only way to explain this is to conjecture that each generation of armor officers since 1944 has demanded incremental improvements on the 1944 design while simultaneously refusing to seriously consider any other configuration. That is exactly what happened, and that is why, instead of offering altogether greater striking power, today’s battle tanks are burdened with ever more active and passive defenses against anti-tank missiles that cost less than a hundredth of those defenses.


Aircraft Carriers: There were no aircraft carriers in 1914, only the British seaplane tender HMS Hermes. Thirty years later, the large-deck aircraft carrier with below-deck hangar space, a small island on top, hydraulic catapults for launching and arrestor cables for recovering aircraft had become the capital ship of the age. The aircraft carrier was greatly valued for its unique ability to convey air power beyond the range limits of combat aircraft in the days before aerial refueling.

Now, 63 years later, that same 1944 configuration remains unchanged in its basic forms despite all subsequent incremental improvements, large and small—from steam catapults to angled decks to nuclear propulsion. More important, aircraft carriers remain the capital ships of the navies that have them, and the envy of those that do not. Yet manned aircraft, as well as missiles and unmanned aircraft, can now have global range, so sea-basing has lost its once indispensable function of bringing short-range aircraft within reach of their targets. Instead it provides a hugely expensive and vulnerable (albeit more versatile) base to attack targets also within reach of other aircraft.

Not coincidentally, the fighter aircraft, main battle tank and aircraft carrier are of central importance institutionally for their respective components of U.S. and other armed forces. Hence the renewal of those specific platforms with ever more perfected versions of the same classic forms greatly preoccupies service organizations, service chiefs and their civilian appendages. There is a veritable culture around each of these weapon configurations, which is of course inherently conservative, as is any culture.


Other platforms and weapons are just as resistant to change as fighter aircraft, tanks and aircraft carriers in ways that increase costs and degrade effectiveness. Three are most interesting for our purposes: the very ancient field artillery, last century’s over-the-beach amphibious vessels and vehicles, and the more recent attack helicopter. All three configurations can still be valuable in combat as specialized equipment acquired in small numbers, but not in the way they are designed and deployed today.

In the case of field artillery, more can be done these days by much cheaper mortars with guided bombs and by geographically more flexible air power. In the case of amphibious vehicles, it is because large-scale amphibious landings in D-Day style are wildly unlikely today. And for good reason. In the 1991 Gulf War, for example, the Marines were forced to cancel the largest landing operation since Inchon in 1950 because fewer than fifty reasonably modern, and quite inexpensive, anti-ship were mines in their way.

In the case of attack helicopters it is because air assaults by massed attack helicopters cannot possibly succeed in modern conditions against armed enemies because of their high vulnerability to contemporary weapons. Case in point: In 2003 the U.S. Army’s AH-64s failed against Iraqi armored forces of low quality, suffering much damage while inflicting little. Large, very noisy machines that cannot fly either fast or high cannot prevail against the contemporary proliferation of ground weapons that can shoot them down, including ordinary machine-guns and hand-held missiles that fixed-wing combat aircraft can over- or out-fly with ease.

In contrast to field artillery and amphibious craft, which served important purposes at one time or another, attack helicopters may well be an outright wrong turn in the evolution of weapons. They always seem to fail in combat against enemies who can shoot back, and have therefore been absent, inconsequential or highly problematic in recent wars. Only their unique institutional value to armies that are not allowed their own fixed-wing combat aircraft can explain why attack helicopters continue to be developed and produced in large numbers.

Overcoming the Procurement Paradox

The only way to overcome the procurement paradox is to pursue macro-innovation in major platforms to make best use of new technology. But thanks to hidebound service cultures, we instead spend fortunes on micro-innovations meant to remedy the obsolescence of old configurations and practically nothing on revolutionary new platforms.

Worse, perhaps, we cling still to the old model of maximum homogeneity in platforms and weapons. There was once a time when mass armies, mass air forces and 2,000-ship navies could only be equipped efficiently with mass-produced equipment, but that has not been true for years. Not only do we rely much less on sheer numbers, but today’s flexible-production technology allows for far more economical customization than we ask of it. If we are going to pay the costs of building weapons more or less by hand, it makes no sense to build them all the same. Indeed, the great variety of available sub-systems favors heterogeneity and mixed task forces because all these sub-systems can be useful, but very few platforms, if any, can include them all.

For example, many kinds of sensors now operate across the electromagnetic spectrum and all sensor data can be securely communicated all the way up and down the chain of command in real time. Therefore, not all platforms need their own identical set of sensors, even if they could accommodate them all. By equipping the individual platforms of air squadrons, tank battalions, missile-boat flotillas and so forth with dissimilar but integrable sensor suites, total sensor costs could be greatly reduced with no significant loss of performance.

Here’s one way to describe the essence of the point: Think of individual weapons platforms not as discrete units, but as fractional, networked parts of a whole. If the conceptual unit of operation is the ensemble of platforms linked together with reliable, real-time communications rather than a individual machine, platform design and function begin to look radically different. We are living at a time when the concept of a distributed system is widely understood. Why we are unable to apply this elemental understanding to weapons design is a reason for wonder, particularly when it is so easy to demonstrate how it can work. Consider the following two examples.


Unmanned Aerial Vehicles. Resistance to one recent macro-innovation—the unmanned aerial vehicle, or UAV—has already been partially overcome, proving that we can do this if we try. The simplest function of a UAV is to fly over enemy territory to observe “the other side of the hill.” This is a requirement so elemental that even the most conservative armies have rushed into service anything that could fly, starting with hot air balloons long before Italy used biplanes in the 1911 conquest of Libya to inaugurate heavier-than-air combat aviation.

Unmanned aerial vehicles are not new: Several kinds were operating in the 1950s and remotely controlled drones were flying long before then. Yet it was not until June 1982 that UAVs were deployed operationally as an integral part of a combat force in war: The Israeli Army’s 162nd Division used observation RPVs (remotely piloted vehicles, as they were then called) in their fight against Syrian forces in Lebanon. The dramatic results of that experience were widely shared with the U.S. Department of Defense. The evidence ought to have been immediately convincing: The actual imagery was taped. Yet here we are in 2007, and the integration of UAVs has only just begun, even in the most advanced armed forces, including those of the United States. How does one explain this?

The most prevalent excuse for resisting anything new is cost, but that excuse cannot be used against UAVs as a category. While one or two types of UAVs are very expensive, most are rather cheap. Nor is there evidence to support the widespread belief that the introduction of pilotless aircraft has been impeded by pilot-dominated command structures. It seems instead that the resistance to UAVs is more a case of diffused institutional resistance to any new platform category that must inevitably be funded at the expense of established ones.

Such determined institutional resistance can be documented. For example, the IAI/TRW Hunter UAV program was cancelled in 1996 after the acquisition of an initial batch because U.S. Army evaluators reported many severe defects: inadequate range, unsatisfactory datalink, too big to fit into the designated transport aircraft, unstable software, and unacceptable engines. After considering (one hopes only perfunctorily) an absurdly expensive $2 billion program to remedy this long list of crippling defects, the planned acquisition was simply cancelled. The cancellation inevitably perpetuated the roles of existing U.S. aviation platforms, notably helicopters and fixed-wing light observation aircraft. Alas, this could not be helped, for the cancellation was seemingly a straightforward matter of rejecting defective equipment.

As it happens, however, the initial batch of entirely unimproved Hunters, supposedly crippled by defects, did not go to waste. In the spring of 1999, eight of the surviving Hunters, redesignated RQ-5A, were sent to Albania in support of Operation Allied Force, the NATO air campaign against Serbia. In the course of 281 sorties (281 sorties for only eight aircraft) the Hunters provided real-time video of conditions on the ground both to commanders on the spot and, via satellite links, to NATO headquarters. Hunter operators identified and located targets for the air campaign and often stayed on station during air strikes to provide real-time damage-assessment, greatly reducing the need for follow-up strikes.

In 2002, Hunters were tested experimentally for ground strike operations, dropping Brilliant Antiarmor Munitions (BATs) to achieve direct hits on tank targets. Later a Hunter was armed with the BAT-derived “Viper Strike” fitted with a laser seeker: Nine drops yielded seven hits. In 2003, the Army used Hunters for scouting, fire-observation, damage assessment and overwatch roles during the invasion and subsequent occupation of Iraq. By mid-2004, when leftover Hunters had flown some 30,000 flight hours—a remarkable demonstration of reliability—another 14 unimproved Hunters were purchased and immediately pressed into service.

The 1996 cancellation of the Hunter program was thus clearly not the result of its shortcomings but of exaggerated or simply unnecessary requirements, all in the service of institutional resistance to new platform configurations. UAVs were not rejected outright but were instead disqualified through the imposition of requirements that were inappropriate for the new configuration—namely, reliability and versatility characteristics of manned aircraft. The bureaucratic kill mechanism worked like this: Adding redundancy for more reliability would increase costs, but something so expensive should carry more than just one sensor. Adding sensors would make the UAV more expensive still, so much so that it should be equipped for safe recovery in all circumstances. A few applications of this line of reasoning soon made UAVs as costly as the equivalent manned platforms or more so, without giving it the versatility of manned platforms. The result, though bad for U.S. military capabilities, was certainly good for the attack helicopter business, on which far more has been spent since the advent of UAVs than on UAVs themselves, and by orders of magnitude.

Today, UAVs have overcome most institutional barriers in the world’s more advanced armed forces. They are likely to be fully accepted when the next necessary step is taken: the deployment of UAVs in groups, as squadrons and fleets operating synergistically, as manned platforms now do. This benchmark will lead to a new requirement: automatic or nearly automatic operation from pre-flight check-out to debriefing downloads. This will happen because once UAVs are deployed as broadly as they should be, they will require so many pilot-rated personnel that it will eventually be necessary to automate them.


Versatile Combat Aircraft. Multi-role fighters gradually became the standard configuration in the 1960s as distinctions between fighter-bomber, interdiction and attack roles grew blurry, thanks to technological change. The technical constraints that had forced sharp choices between these sub-configurations began to erode long before then, but institutional urges prolonged role distinctions. For example, the survival into the 1960s of the pure interceptor aircraft—such as the American F-102 and F-106, or the Soviet Yak series and later the MiG-31—can best be explained by the existence of separate “interceptor” commands like PVO Strany and the USAF Air Defense Command that wanted to select and buy their very own distinctive aircraft.

All this is now past, and it is a major advance to have abandoned obsolete role distinctions that imposed vast costs because of their dissimilar design, development, production, training and maintenance requirements. Now the time has come for another advance, away from tightly packed fighter-size aircraft, in which today’s sensors, communication devices, data processors and displays must be squeezed at great cost, to larger Versatile Combat Aircraft (VCA).

VCAs would be characterized by “plug-and-play” equipment racks and operating stations in the main cabin, longer unrefueled range and much greater endurance than any fighter-sized aircraft. They would, or at least could, also have any or all of the following characteristics:


• fuselage/wing fittings for optional dorsal, lateral and belly antennae;
• internal bay or bays for expendable sensors, ordnance and, possibly, recoverable UAVs;
• “smart” hard points for equipment pods and air-to-air and air-to-surface weapons;
• aerial refueling capability.
To be all that a VCA can be, it could not be smaller than a big executive jet with a stand-up cabin, but it could be as large as a C-5 or Airbus 380. VCAs could not reach supersonic speeds, nor could they be highly maneuverable. But they would have no need of either: The velocity and agility required tactically would be provided by their missiles, so they would not need to be duplicated by the platform itself.

Despite these limits, VCAs would not be particularly vulnerable. As with the VCA’s closest predecessors like the AWACS, J-STAR and Phalcon, all large, non-stealthy, non-agile subsonic aircraft, actual operational vulnerability would be much less than the apparent tactical vulnerability. Combat experience to date shows that, when flying at typical cruise speeds (Mach 0.8) at altitudes well above 30,000 feet, even airliner-type aircraft can usually evade interception by short-range fighters that are not already airborne, as well as protect themselves with electronic countermeasures (to which radars with circuitry-burning power levels could now be added). In addition, VCAs could protect themselves with air-to-air missiles, especially longer-range varieties. In due course, if VCAs are deployed, air-to-air missiles of ultra long-range are likely to be developed for them.

VCAs cannot be cheap, but they could be economical all the same, especially for countries that have geographically expansive operating requirements. The same individual VCA, not merely the same type of aircraft, could quickly be fitted out for any of several different roles. Any airframe can be converted given enough time and money, but the VCA would be designed for such modularity, taking only an hour or two for reconfiguration rather than weeks, months or years. With that kind of designed-in flexibility, VCA roles could include maritime surveillance, classification and surface strike; anti-submarine detection, location and attack; airborne early warning, and beyond-visual-range interception with long-range air-to-air missiles; airborne command, control and tactical direction of air, ground or naval forces; detection and classification of surface targets with Synthetic Aperture Radar; direct attack of surface targets in low-threat environments; detection of low-contrast targets via controlled UAVs; air-defense suppression, ECM and kinetic; airborne refueling, and all forms of electronic intelligence collection and some immediate analysis by on-board specialists and linguists.

The VCA would also be economical in another way. Because the same aircraft could perform functions now compartmentalized among different platforms, their capabilities would be fungible. VCAs could therefore be surged force-wide for any role for which operating crews, equipment and ordnance are available. That would directly offset the most obvious shortcoming of VCAs for smaller countries, that their high unit cost would restrict their numbers.

Beyond that, VCAs could be used synergistically, the same platform working in different roles simultaneously. VCAs fitted out for different roles could offer tactical and operational synergies without sacrificing airframe diversity. Some cost savings would be realized from the commonality in the acquisition, operation and maintenance of the platform itself, which would have the same engines, cockpit, flight-crew training, replacement parts and so on regardless of its role. Still more cost savings would flow from modification and modernization economies. The expense of fitting today’s wide variety of sub-systems and their components into the nooks and crannies of fighter-sized aircraft would disappear, as would the expense of modifying, upgrading or replacing those sub-systems and components within rigid volume and other functional constraints. With VCAs, modifications, upgrades, even total mission modernization or conversions, could be plug-and-play, or at least easily accommodated within the less-constrained main cabin.

For all these reasons, VCAs could advantageously complement or replace almost all current platform types, including fighters, especially for militaries with long-range operating requirements. At present, for the lack of an alternative, such militaries acquire inherently unsuitable jet fighters of very limited range and endurance.


Similar arguments can be made on behalf of a multi-purpose armored combat vehicle, without a main turret gun, to replace main battle tanks and the array of armored personnel carriers that accompany them. And the same reasoning applies to the arsenal ship concept, and to still other platforms for which the needed sub-systems, components and weapons are ready for production.

All such arguments for replacing the canonical systems of World War II predictably will be resisted for understandable but very costly institutional reasons—reasons almost always masked by seemingly reasonable objections focused on some shortcoming or other. Those confronting such objectives should keep in mind that almost every military innovation entails some potential loss of capability. The first arquebuses traded a lower rate of fire and shorter range than longbows in exchange for greater lethality. Their winning advantage, however, was ease of training: The longbow was best learned from childhood, while musketry could be learned in a week, allowing regiments to be raised at will.

For reasons not ultimately very different, UAVs could now advantageously replace more capable manned aircraft. VCAs could now replace fighters, as well as half a dozen specialized aircraft types. Multi-purpose armored combat vehicles could replace the big guns of main battle tanks. And arsenal ships could replace individually cheaper destroyers, as well as complement much more expensive aircraft carriers.

For all the diversity of these new platform configurations, they share in common the fact that the platform is designed to accommodate today’s sub-systems and weapons, instead of the other way around. They also share a design premised on the widespread use of distributed systems. This is the best way, perhaps the only way, to escape from the downward spiral of the procurement paradox. The alternative is escalating unit costs for fewer and fewer platforms, the likely net strategic effect being increasingly ineffectual military power in a world of increasingly unconventional challenges.

Count the Days, Not the Years, of Market Pullbacks

September 2, 2007

Fundamentally

Count the Days, Not the Years, of Market Pullbacks

By PAUL J. LIM

THE big fear on Wall Street is that the growing mess in the mortgage market may trip up the second-longest uninterrupted bull market in history, after the run-up from 1990 to 1997.

But would that be so terrible?

Granted, if this bull, which has rallied for nearly five years without a significant setback, morphs into an official bear market, investors would certainly have much reason for worry.

There have been 10 official bear markets — defined as a drop in equities of at least 20 percent — since 1946, based on the Standard & Poor’s 500 index of widely held stocks. Those plunges, on average, have erased nearly a third of the market’s value over 490 calendar days, according to S.& P. Even worse, the market has needed an additional 669 days, on average, to make up those grisly losses.

But what if the market sell-off doesn’t go that far? What if, instead of a bear market, stocks simply slip into a plain old correction?

Certainly, the odds are much greater that stocks are headed for a correction — defined as a loss of 10 percent or more — than a bear market.

Since 1928, there have been 87 corrections in the S.& P. 500, according to a recent tally by Ned Davis Research. That works out to slightly more than one a year, though since the end of World War II, there have been significantly fewer such downturns. In contrast, there have only been 23 bear markets over the last 80 years.

More important, corrections are far less destructive than many investors assume.

For instance, since 1946, corrections in the S.& P. 500 have driven down stock prices by about 14 percent, on average. Given that equities are already off by about 5 percent since July 19 — and have fallen as much as 11.9 percent if you count intraday highs and lows for the S.& P. 500 — the market may have already sustained a good percentage of its potential losses. (Again, this is if we’re headed for a correction and not a bear market.)

Even if this turns out to be a severe correction, the situation may not be all that bad.

Historically, corrections have lasted only about a third as long as bear markets. In fact, the 16 corrections in the S.& P. 500 since 1946 have lasted an average of only 148 calendar days. And several recent corrections have been far shorter.

For example, the three corrections in the late ’90s — in 1997, 1998, and 1999 — lasted only 51 days, on average. By comparison, the sell-off that began on July 19 is already 45 days old.

Investors may also be surprised to learn how quickly stocks recover their losses after a correction.

Indeed, since 1946, it has taken the market just 111 days, on average, to rise to pre-correction levels. “So it’s about eight and a half months total on the way down and then back up,” said Sam Stovall, S.& P.’s chief investment strategist.

Investors should take some comfort in that, given that they are supposed to be in equities for the long term. (In fact, they shouldn’t even be in stocks if their time horizon is only eight and a half months.) At the very least, Mr. Stovall said, the speed at which markets historically recover should give investors confidence “not to react so hastily to the current troubles.”

To be sure, no one is wishing a correction on this market. But corrections “are a healthy means of relieving the excesses in the market and of restoring a healthy respect for risk,” said James B. Stack, editor of the InvesTech Market Analyst, a newsletter published in Whitefish, Mont.

That has already happened in this sell-off. Consider that investors who had been betting big on volatile assets — like small-capitalization stocks and shares of companies in the emerging markets of Asia, Eastern Europe and Latin America — have lost much of their appetite for risk.

In fact, over the last month, shares of high-quality blue-chip domestic stocks have held up better than small-cap stocks. And mutual funds that invest in the stable developed markets of Western Europe have lost less than funds that invest in emerging-market stocks.

Some investors say they think that the market is already in correction territory, and for this reason: If you count the intraday highs and lows of the market and not just the closing prices, the S.& P. 500 declined by nearly 12 percent from July 19 to Aug. 16.

But the purists say this doesn’t count because market corrections have historically been defined by the closing values of the S.& P. 500 and other stock indexes. Still, even on that basis, the S.& P. 500 recently came within a hair of slipping into an outright correction: from July 19 to Aug. 15, the market tumbled 9.4 percent, based on the S.& P. 500’s closing prices.

OF course, whether or not we’re technically in a correction, a sell-off of this magnitude was long overdue.

Historically, corrections are supposed to be routine events. Yet it’s been about four and a half years since investors have lived through a good old-fashioned correction — at least one that didn’t devolve into a bear market.

The last official correction was from Nov. 27, 2002, to March 11, 2003. Over that short period, the S.& P. 500 slumped 14.7 percent.

But that correction, in particular, offers investors a good lesson. Even though you may be scared to stay the course amid rising volatility and falling stock prices, keep in mind that corrections can shift back into bull markets just as quickly as bulls slip into corrections.

Paul J. Lim is a financial writer at U.S. News & World Report. E-mail: fund@nytimes.com.