This is an excerpt from Managing National Security in a Time of Geopolitical Transition, a new publication by John M. Deutch and David Fedor, produced by the Hoover Institution’s Global Policy and Strategy Initiative. Download a copy of the report here.
The world is in transition from the Cold War era—roughly from the end of World War II to 1991—to a new era that we and others term the strategic competition era. The foreign policy and international economic issues arising in this new era require a US national security structure radically different from the one created for the Cold War.
The policies and institutions of the US defense apparatus were responses to the nature of the geopolitical environment that we then faced. Today’s very different geopolitical landscape requires its own approach and institutional frameworks rather than inherited systems from the past.
A key change in the current transition is China’s rapid rise to a global military and economic power. For example, if China’s nuclear arsenal increases from six hundred warheads in 2024 to perhaps fifteen hundred and is deployed not only on intercontinental missiles but also by capable long-range bombers and submarines, the world will shift from a bipolar to a tripolar nuclear world. In such a world, what is our understanding of how to establish deterrence or whether the US nuclear umbrella will still be effective for our allies?
The transition to the strategic competition era introduces new security-linked economic and business dynamics as well. Transformative technologies such as artificial intelligence, quantum computing, ubiquitous space-based communications, and relatively inexpensive unmanned vehicles, for example, are being developed primarily by the commercial sector in both the United States and China. These have direct implications for the effectiveness and survivability of deployed conventional US land, sea, and air combat systems.
More broadly, US manufacturing economic competitiveness and capacity are arguably declining relative to China and some of our partner nations in the Indo-Pacific, while it is improving relative to Europe. This has implications for international trade in raw or refined critical materials, in intermediate components such as steel, and in advanced manufactured products such as batteries and semiconductors. In a more dangerous world, what are the options for benefiting from comparative advantage through trade while reducing vulnerability to coercion in critical supply chains?
Three areas in particular deserve new thought in the strategic competition era:
- the defense budget;
- the defense industrial base;
- the national security planning and implementation system.
Budgets and allies
The collapse of the Soviet Union in 1989 portended a sharp decline in the military security risks facing the United States, which led to a bipartisan public call to reduce defense spending and produce a “peace dividend.” Today, at the outset of the strategic competition era, the significant increase in Chinese conventional and nuclear capability and the behavior of North Korea and Iran have resulted in a perceived escalation in the military threat posed to the United States, which has led to bipartisan demand for a large increase in defense spending.
Ups and downs in defense spending depend on international circumstances. And since maintaining national security is expensive, the cost becomes a domestic political issue. During the Cold War era, defense spending fell as a percentage of gross domestic product (GDP) from a Korean War high in 1953 of roughly 13 percent to roughly 3.4 percent today, near the historic low (although the GDP today is about eleven times larger in real terms).
Moreover, since the fall of the Soviet Union, defense expenditures have been considered a discretionary (as opposed to mandatory) budget expense. The effect has been to keep defense expenditures as a percentage of GDP quite low.
During that same transition from the Cold War era, global economic and security relationships among countries have diverged.
In 1949, twelve nations agreed to form a mutual defense pact to counter a perceived threat of Soviet conventional forces attacking Western Europe. Today, NATO has thirty-two European and North American member countries, bound together in part to halt Russia’s expansion into Ukraine and possibly other Baltic or Balkan countries. Many NATO members have joined because of Article 5 of the treaty, which states that “an armed attack against any one country is considered to be an attack against all members” (Ukraine, however, is not a NATO member and most likely never will be). The United States effectively is the guarantor of Article 5; however, if asked to confirm this commitment today, it would be unlikely to do so.
There also is sharp disagreement about how NATO expenses should be shared among member countries, and much unhappiness in the United States, which believes it is paying more than its fair share.
In the Cold War era, nuclear stability was preserved by deterrence—durable deployment of Soviet and US nuclear forces that provided survivable forces able to withstand a surprise first attack by either party. Lengthy negotiations between the United States and the Soviet Union resulted in arms-control agreements that set limits on long-range nuclear weapons arsenals that precluded the possibility of a disarming first strike. These agreements also limited the costs to the United States of producing and maintaining an ever-increasing nuclear weapons arsenal.
It is not clear how to achieve comparable deterrence in a tripolar nuclear world. A firm tripartite treaty is most unlikely. The fact that China is likely to remain on the sidelines of any US-Russian arms-control accord means that such a treaty would not provide stable deterrence. Informal arms-control agreements (as opposed to binding treaties) or a sequence of partial agreements are more likely. The result will be confusion among the three principal nuclear nations and possible destabilizing pressure on smaller nuclear powers, such as North Korea, or inducement for some countries to acquire nuclear weapons capability, such as South Korea or Saudi Arabia. This could lead to a return to the tensions of the early Cold War era, when nuclear war was considered more probable, and to renewed interest in civil defense.
Security decision-making in the new strategic competition era is vastly more complex than in the Cold War. The US national security planning system must have answers, or at least credible stories, for a host of difficult questions.
What will be the capabilities of Chinese nuclear and conventional forces? Will Russia and China be allies? What will be the conditions in the Middle East, especially regarding Iran? Will Chinese manufacturing continue to displace the United States in international economic markets? How will trade instability in international markets such as oil or gas affect armed conflict? Will climate change lead to water shortages and destabilizing migration?
Expanding the industrial base
Technological advances are changing the modern battlefield. Artificial intelligence will have a great impact on the general economy, but it will also introduce major changes to military systems and operations, such as precise control of unmanned autonomous air and undersea vehicles, as well as disruption of digital communication.
The defense industrial base provides essential functions: It supplies equipment and systems, services required to operate deployed military systems, and standby capability to meet the needs of unanticipated conflicts. The base also must maintain a workforce that remains up to date with evolving technology. Integration of the commercial and defense industrial base offers the benefits of lower cost and more rapid innovation. In the strategic competition era, the Pentagon also must find a way to take advantage of the skills of smaller, more agile firms that are developing new digital technology and artificial intelligence.
Today, the concept of defense “innovation” has replaced the highly productive concept of “research and development” (R&D) for early-stage discovery in the Cold War era. Innovation is broader than research and development, and it refers to the entire process of inventing, developing, and deploying a new technology or business practice. In a time of rapid technological changes that lead to important commercial and military innovations, it is important for the Defense Department to encourage and accelerate such change. Congress and military leaders are aware that the defense industrial base needs to broaden its reach beyond traditional military contractors.
One can be skeptical that innovation can successfully be introduced from the top down, rather than the bottom up. Instead, ways need to be found to more systematically integrate selected parts of the commercial sector with the defense sector.
Reforming the National Security Council
A new strategy is needed to integrate the new economic and military policy- and decision- making aspects of the strategic competition era, and that strategy needs to be supported by a new National Security Council organization. The new geopolitical era requires a fundamental reassessment of the management of our national security affairs and the key elements of our defense structure to protect US interests and those of our allies.
The design principles for a new NSC structure should include the following:
- Consideration of the close coupling between defense and economic matters.
- A new tier in the NSC of analysts who have commercial experience and professional standing in the private sector. They must have access to classified material and defense-sector practices to define options for the president regarding the costs and benefits of actions that affect both national security and economic prosperity.
- No authority to override the formal NSC structure or military judgment.
- Mechanisms to ensure that the knowledge accumulated by this new organization flows into the national security ecosystem, where it will influence Defense Department practical operations, deployment decisions, R&D, and procurement.
- Adjustment in the scope and jurisdiction of congressional committees to conform to the more flexible and integrated defense and international economic policy structure.
Constructing such a new NSC system will not be easy. It will take some time to design models and deliberate on their merits. An independent advisory committee with broad membership drawn from public and private organizations with national security experience would be a productive first step along this path.
