The United States is confronting a devastating pandemic in which, according to worst-case estimates, millions might die. Despite being the richest nation on earth, we have found ourselves with critical shortages of the most vital items in the battle to vanquish the COVID-19 disease: gloves, goggles and other personal protective equipment for frontline healthcare workers, essential devices like ventilators, test kits, and swabs, as well as stocks of pharmaceuticals.
Our healthcare system is in imminent danger of being swamped by the exponential growth of the gravely ill seeking medical attention.
In response to already existing shortages, President Trump last week invoked the Defense Production Act, but he has thus far declined to use its powers to help speed production of desperately needed goods. News accounts suggest that some business leaders have lobbied the administration against playing a more central role in mobilizing the economy, even at a time of severe national emergency. The president’s comments on the issue reflect a blend of half-baked free-market slogans and misinformation about what the law actually permits. The result has been a confusing jumble of claims about what is actually being done, a lack of clarity about what is planned, and disturbing reports of states scrambling to compete with one another and the federal government for scarce resources. If there is a national plan for meeting the increasingly urgent material needs of this crisis, it is not in evidence.
It need not be this way. The 1950 Defense Production Act was originally intended to help speed the mobilization of American industry to fight the Korean War. Contrary to President Trump’s recent statements, the Act does not require the federal government to become a “shipping clerk,” nor does it involve “nationalizing our businesses.” While the law can be used to compel industry to prioritize national needs, for the most part it employs financial incentives to direct the flow of resources. Among other tools are low cost loans and procurement guarantees to encourage an expansion of capacity beyond what would be required to satisfy normal market demand and anti-trust waivers that enable firms to cooperate in meeting emergency requirements. Instead of using these instruments in a coordinated, purposeful way, the White House has chosen to rely on exhortation and frantic improvisation. If it does not change course and take charge soon, the results could be tragic.
Eventually, and preferably sooner rather than later, the federal government is going to have to take responsibility for directing a truly whole-of-nation effort to fight this deadly threat. What is needed now is a thorough, accurate assessment of exactly what will be required in the coming months — how many ventilators, how many masks, and so on—an inventory of current production capacity, and a plan for necessary expansion, including government contracts. If there is excess when the worst has passed, some of it can be stored in an expanded, modernized stockpile. Once it is clear that national needs can be met, the United States should also stand ready to help other countries, especially those in the developing world which have not yet felt the full brunt of the pandemic and are even less well-prepared to deal with it. The federal government should also provide whatever assistance is needed to help American companies, universities, and national laboratories develop and mass produce therapeutics and, eventually, a vaccine. By the time this crisis has passed, the United States, ideally, should have established itself as the medical arsenal of democracy. Among its other benefits, this would help offset China’s attempts to capitalize on the crisis, and to deflect attention from its own responsibility for this disaster, with a few highly publicized deliveries of medical equipment.
The last few weeks have also revealed a deeper deficiency in our preparations for responding to security threats, whether the source is nature or a hostile nation. Thanks in part to the process of globalization, over the last several decades the United States has surrendered much of its capacity to manufacture things like active pharmaceutical ingredients needed for medicines or electronic components and printed circuit boards essential to both weapons systems and consumer devices. Under normal, peacetime conditions, when American companies can import what they need to make final products at home, or assemble them in overseas factories, these shortfalls are barely noticeable. Indeed, in a highly integrated global economy, with distributed production and “just-in-time” delivery, such arrangements may appear to be efficient and risk free. It is only when disaster strikes, supply chains are broken, and demand suddenly exceeds the capacity of domestic industry, that our vulnerabilities are exposed.
To address this danger, the United States needs a mechanism for identifying shortfalls in its current capacity and finding ways to fill them. Fortunately, we do not need to reinvent the wheel. In 1950, shortly after the Defense Production Act passed into law, the U.S. government also stood up a new agency to help guide the use of the instruments it created. Housed in the White House, the Office of Defense Mobilization was given the authority “to direct, control, and coordinate all mobilization activities of the Executive Branch of the Government.”
Staffed by civilians, the ODM engaged in “resource-requirement” calculations for essential raw materials and finished products, setting numerical goals based upon estimated wartime demand. Where expected requirements exceeded available resources, ODM recommended the use of incentives to encourage industry to expand its capacity to produce necessary quantities of everything from steel, cement, aluminum, iron ore, copper, petroleum, and sulfuric acid, to wood chippers, antifriction bearings, precision screws, steam turbines, metal fasteners, machine tools, gears, propellers, and presses.
Originally intended to continue its functions in peacetime, once the war was over, ODM soon found its responsibilities pared back, its staff reduced, and its authority diminished. The reasons were strategic, ideological and economic. With the advent of thermonuclear weapons it was widely assumed that a future war would be over in a matter of days, if not minutes, eliminating the necessity, or even the possibility, of industrial mobilization. Especially under the Eisenhower administration, principled opposition to government intervention in civilian industry, and suspicion of anything that smacked of planning and “socialism” helped weaken support for ODM’s mission. Even in the 1960s, when strategic assumptions changed and resistance to “big government” waned, it was generally believed that the American industrial base was large and diverse enough to be able to gear up and produce whatever might be needed in a future conflict.
The coronavirus crisis has exposed with painful clarity the inadequacy of our preparations for a major national emergency. What is needed now is the immediate creation of a skeleton office of medical mobilization, staffed by competent experts from the private sector and relevant government agencies, and tasked with the responsibility of helping to close the now obvious gaps between resources and requirements. This kind of guidance will be essential if the authorities contained in the Defense Production Act are to be used quickly and to maximum effect.
In the somewhat longer term, this mechanism can serve as the foundation for a permanent organization modeled on the original ODM. This new agency would work with other departments to estimate needs in a variety of scenarios, including everything from faster-than-expected climate change and future pandemics, to terrorism and armed conflict, including a possible protracted conventional war with China. Where potential shortfalls are identified, the office should recommend ways in which they can be filled. In some cases, it will be appropriate and sufficient to create stockpiles. In others, it may be prudent to assume that imports of needed items will be available from allies and other friendly countries, perhaps especially those like Mexico and Canada that are close at hand. In some areas, however, it will be necessary to use a variety of policy instruments to try to expand (or rebuild) productive capacity in the United States. Pharmaceuticals and medical supplies would be an obvious place to start, with segments of the electronics industry to follow.
The object of the exercise should not be to try to achieve economic autarky or to build a “Fortress America,” using claims of national security as a justification for protectionism or unnecessary corporate subsidies. Rather, the goal should be to rescue us from unfolding catastrophe and to take prudent, cost-effective steps to reduce the risk that a disaster of unpreparedness of the kind we are presently experiencing ever befalls us again.