Laura D'Andrea Tyson in Support of Corporate Welfare

from Who's Bashing Whom?:
Trade Conflict in High-Technology Industries
Washington Institute for International Economics, 1992
Laura D'Andrea Tyson

(pp. 88-90) In its early years, up to 100 percent of the [semiconductor] industry's output was purchased by the military, and even as late as 1968 the military claimed nearly 40 percent. In addition, there was a derived defense demand for semiconductor output from the military's large procurement of computer output throughout the 1960s. Direct and indirect defense purchases reduced the risk of investment in both R&D and equipment for semiconductor producers, who were assured that a significant part of their output would be sold to the military. The willingness and ability of the U.S. government to purchase chips in quantity at premium prices allowed a growing number of companies to refine their production skills and develop elaborate manufacturing facilities. . . .

The government continued to pay for a large share of R&D through the early 1970s, providing roughly one-half of the total between 1958 and 1970. As late as 1958, federal funding covered an estimated 85 percent of overall American R&D in electronics. . . . [T]he military, which remained the largest single consumer of leading-edge components throughout the 1960s, was willing to buy very expensive products from brand-new firms that offered the ultimate in performance in lieu of an established track record.


(pp. 157, 169-170) Both Boeing's monopoly of the wide-body, long-range market and its consequent position in the global industry have their roots in engine technologies and design competitions funded by the U.S. military. . . . During the first twenty years of its existence . . . Boeing ran losses on its commercial operations. . . . Boeing was able to sustain these losses only because of its military operations. At least through the 1960s, endemic market volatility and subcompetitive returns in the commercial aircraft market were offset by market security and often supercompetitive returns in the military market. Operations in the latter market provided an implicit subsidy for operations in the former.

At critical moments, government contracts provided the safety net to catch a plummeting commercial airframe company. . . . Even as late as the early 1980s, for example, the U.S. Air Force bought 60 K.C.-10s, an airplane that was virtually identical to the D.C.-10 (except for the addition of in-flight refueling equipment). Without this purchase, McDonnell-Douglas would not have been able to keep its D.C.-10 production line open. . . . The N.A.S.A. R & D budget paled in comparison with the explosion of federal funds for defense R & D in aerospace during the postwar period, but N.A.S.A. continued to play an important role through its research installations and its participation in several collaborative R.&D. projects.