Two decades into the twenty-first century, the U.S. national security agenda is once again dominated by great power competition, as rivals are “contesting our geopolitical advantages and trying to change the international order in their favor.”  In a sharper key, this registers as alarm bells. Repeated, recent war games evidence real possibilities, if not probabilities, of U.S. defeat in a limited war with China over Taiwan, among other scenarios.  That such an outcome is possible, however, remains marginalized in mainstream American thought; it requires a reckoning. It is critical, therefore, as the United States reorients itself to threats from near-peers not seen since the Cold War to take stock of where the U.S. national security ecosystem stands and how it intends to gear up.
What follows hopes to contribute to that review, scrutinizing American defense research and development (R&D), investment which will determine American competitiveness as great power competition matures. Doing so centers around the question “Why does U.S. defense R&D funding take its current form?”  The answer provided here surveys the centrality of defense R&D to American national security, presents the common perception that current levels of investment in defense R&D are adequate, and then challenges this perception, suggesting that greater financial commitments and reforms in the coming years are imperative. Next, this article puts that argument in historical perspective, contrasting defense R&D between the early years of the Cold War and the early years of current great power competition and examines the path between these periods. Finally, it looks ahead to the undesirable upshot of our current defense R&D trajectory.
The Importance of Defense R&D
Research and development are logically at the core of the Department of Defense (DOD). Indeed, DOD is largely designed to address and outpace both current and anticipated threats, maintaining overmatch against adversaries to protect the United States. Defense R&D, thus, is critically important in three ways. First, from airplanes to the internet-the requisite antecedents for the U.S. Air Force and U.S. Cyber Command, respectively-the defense R&D of yesterday informs both the magnitude and shape of the total defense budget of today, while standing as a significant budget item in its own right. Second, by drawing on defense R&D that is successful relative to adversaries, the United States enjoys warfighting advantages; and, conversely, from defense R&D that is unsuccessful relative to adversaries, suffers disadvantages. The Congressional Research Service thus concludes that past R&D investments have resulted in “substantial technological advantages against potential adversaries.” 
These advantages and potential disadvantages, in turn, impact the costs and, relatedly, thresholds of engagement in conflict. Therefore, while the line from defense R&D to conflict engagement is to some degree indirect, it remains critically important. Last and not least, the ability of defense R&D to impact the safety of individual warfighters should not be overlooked. For example, advances in preventive care, battlefield medicine, evacuation, and protective equipment have pushed the ratio of those wounded-to-killed from the historical average of 3:1 to a range of 10:1 to 17:1 today, dramatically reducing the number of combat fatalities. 
Where U.S. Defense R&D Is Thought To Be
Advances like this and historical American military strength engender deep confidence in U.S. military supremacy and the adequacy of current military preparedness. The 2021 National Defense Authorization Act, for example, passed the Senate with an 81-13 vote and a 322-87 vote in the House of Representatives, margins in favor of the status quo that Speaker of the House Nancy Pelosi (D-CA) called “sweeping and overwhelmingly bipartisan.” Then Senate Majority Leader Mitch McConnell (R-KY) stated the law addressed “the evolving threats to [U.S.] safety… and ensure[d] we keep pace with competitors like Russia and China.”  
Such Congressional confidence is supported by seemingly dramatic efforts from the U.S. defense community in the last five years to align defense capabilities (present and future) with a world of great power competition, an idea borne out in a $64.5 billion DOD budget line for R&D.  By international comparison, the United States in 2017 spent more than four times as much on defense R&D as the rest of the OECD combined and more than 16 times the next closest country, South Korea.  These comparisons are complemented by a range of recent steps to bolster DOD’s focus on cutting-edge threats and capabilities. Such efforts include the high-profile creation of the U.S. Space Force and the restructuring of U.S. Cyber Command as a full combatant command. Additionally, the latest budget allocates tens of billions of dollars to projects such as artificial intelligence and lasers and specifically identifies them as necessary to address “long-term strategic competitions with China and Russia.” 
Challenging This Evaluation
While these seemingly impressive comparisons and steps appear to speak to a fulsome response by DOD to a shifting threat landscape, a closer look complicates the picture. Defense R&D spending can be understood as falling into two general buckets. In current DOD parlance, the first bucket is known as “science and technology” and includes the categories of basic research, applied research, and advanced technology development.  These categories are known as DOD’s “seed corn” and are “the pool of knowledge available to DOD and the industrial base for future defense technology development.” 
On the other hand, the remaining “second bucket” R&D categories are “focused on the application of existing scientific and technical knowledge to meet current or near-term operational needs.”  In recent years, the latter bucket has been heavily privileged, growing substantially from about 2000 to 2010 as the United States scrambled to respond to the terrorist attacks of 9/11 through the Global War on Terror and again starting around 2015, in the early days of high-level U.S. adjustment to great power competition. The science and technology bucket, on the other hand, is presently just a sliver of total defense R&D (and a slow-growing one at that). This sliver is in fact decreasing relative to the total defense R&D budget, falling from just three percent in 1996 to about two percent in 2020. 
Contemporary Contrast with the Early Cold War
A more accurate appraisal of current defense R&D, therefore, does not speak to high levels of investment in future capabilities. Yet investments in future capabilities are currently of greater import than at any time since the Cold War. Following 30 years without a near-peer rival, the resurgence of both Russia and especially China have forced policymakers to recognize the current global landscape as one of great power competition. As in the Cold War, the United States must again contend for global leadership and geopolitical power. Reckoning with this shift draws clear parallels to the bipolar rivalry between the United States and Soviet Union. The current moment, the early years of a new period of great power competition, may fruitfully be contrasted with those of the Cold War.
This contrast can be made by assessing three key cross-sections of R&D spending: global, American, and federal. In 1960, U.S. R&D constituted 69 percent of the global total. Of the American share, nearly two thirds was federal and about 80 percent of that was on defense. From 1960 to 2016, the U.S. share of global R&D fell to 28 percent. Within American R&D, the federal role also declined dramatically to about one-fourth of the U.S. total, as the share of defense and other R&D by private firms increased. Finally, defense R&D as a share of total federal R&D also fell to about four of every seven dollars.
The net effect of these compounding relative decreases means that defense R&D relative to global R&D in 2016 was just one ninth of what it was in 1960, a fall from 36 percent of the global total to just four percent.  In plainer English: in 1960, 13 years into the Cold War, the last instance of great power competition, the United States was engaging the Soviet Union on the heels of World War II, a period of significant defense R&D that provided a foundation for globally dominant defense and general R&D. To contrast: five years into the current era of great power competition, the United States is gearing up from decades of relatively declining defense R&D. Perhaps even more importantly, the causal factors that shaped the decline in defense R&D between these two periods are working against its return in the coming years.
How Did We Get Here?
What are these factors? The defense R&D landscape has been transformed by three factors. First, post-Cold War defense budgets embraced unipolarity and divested from science and technology research. Second and third: over the last 60 years, defense R&D was impacted by the same two factors that have dominated change in nearly every facet of political economy: neoliberalism and globalization.
Coming off massive defense build-ups at the end of the Cold War under the Reagan administration, the collapse of the Soviet Union precipitated demands for defense budget contraction among the American public and Congress. To meet this hunger for budget cuts, DOD, driven by Congress, deflated the defense budget and targeted science and technology R&D.  Science and technology R&D was an attractive target because its payouts in capabilities and any related political rewards for Congress were long-term. In the words of one Congressional staffer, “It’s easier to give up something [that will pay off] ten years from now than to give up ‘rubber on the runway’ tomorrow.” 
Preceding this immediate and obvious cause of reduced defense R&D and science and technology defense R&D in particular was a subtler, more fundamental shift in the nature of American business and government. The start of the Cold War evidenced substantial government investment in science and technology defense R&D throughout the 1950s on top of a World War II baseline of unusually high levels of government funding.  However, starting around 1960, DOD retreated from “exercising its prerogatives as science manager-in-chief.”  Instead, defense R&D was increasingly executed on a commercial basis with federal subsidization of commercial R&D in areas of national interest.  This movement to commercial labs enabled a “research bloodbath” in the 1980s and 1990s as the federal government withdrew research subsidies and commercial firms cut research that became a liability without government support. 
The weakness of commercial investment in basic R&D without federal financial support evinces a market failure. Basic research by definition lacks a clear line of sight to profits, with profitability often only occurring as an unintended consequence and on a timeline unsustainable in the private sector. Private R&D, in contrast with government R&D, therefore focuses on applying existing technologies without expanding the knowledge base. The role of government to defray the costs and risks of basic R&D is therefore a necessary one. Contrary to fears that government intervention might crowd out private R&D, economists Enrico Moretti, Claudia Steinwender, and John Van Reenan find that defense R&D “crowds in” private R&D by mitigating prohibitively large fixed costs, generating technological spillovers, and overcoming credit constraints that private firms face. On average, the authors conclude that a “10 percent increase in government-financed R&D generates a 5 to 6 percent additional increase in privately funded R&D” and that even current levels of U.S. defense R&D support an additional $85 billion of private R&D relative to the statistical counterfactual of no federal R&D. 
Despite this theoretical logic and empirical evidence in support of robust defense R&D, the last half-century evidences a dramatic contraction in defense R&D relative to the private sector, a useful proxy for how federal R&D might have grown. Since 1960, federal R&D has increased 220 percent, growth that pales next to a 1190 percent increase in business R&D. As a result, the shares federal and business R&D hold of the American total have nearly flipped since 1960 as business’ share has grown from about 30 percent to about 70 percent and the federal share has declined from about 65 percent to about 20 percent.  Pulling in the same direction as these shifts has been the second hallmark of recent political economic theory: globalization.
While the decline of federal R&D as a share of the American total may best be explained by its increasing commercialization, the American decline relative to the rest of the world despite absolute increases in U.S. R&D requires an explanation beyond our borders. In the last 20 years, China has grown from a marginal global R&D player to one that is second only to the United States by an ever-shrinking degree. This rise has been fueled by unrivaled growth in R&D. Between 2000 and 2016, Chinese R&D grew by more than 1200 percent, roughly four times more than the next fastest-growing country, South Korea, and well ahead of the United States. 
The rise of Chinese R&D collapses the worlds of defense R&D and great power competition. For the first time in the post-Cold War world, massive and rapid growth in R&D has been by an American adversary, not a friend or ally. Thus, we stand at the confluence of previous defense R&D divestiture, commercialization of American R&D, and the rise of R&D by China, the greatest threat facing the United States.
The DOD’s Way Forward
In the last five years, DOD has reckoned with this situation and grappled with the challenge of finding a way forward. DOD has done so in direct language, laying blame for the atrophy of America’s technological edge with a “blunted strategic vision” that “dramatically reduced … investment in research and development for cutting-edge capabilities.”  With this recent awareness, DOD has increased application R&D and doubled-down on harnessing commercial research. Additionally, DOD has attempted to internally reform its organization and culture to identify, acquire, and exploit technologies developed outside of DOD.  Such efforts include emphasis on public-private partnerships within the two highest-level American security documents, the National Security Strategy and the National Defense Strategy.  
Attempts to implement these doctrinal shifts include the 2016 recreation of the Cold War (1977-1986) position of Under Secretary of Defense for Research and Engineering as the fourth most senior DOD official, below only the Secretary, Deputy Secretary, and Chief Management Officer.  Other DOD changes include the creation of the Defense Innovation Unit in 2015 to “‘interface’ between Silicon Valley and DOD,” the 2016 creation of the Defense Innovation Board to advise senior DOD leaders, and the 2017 expansion of the National Technological and Industrial Base.    Together these changes in policy and organization complement increases in operational R&D funding and therefore entrench DOD’s neglect of science and technology research in its reorientation to great power competition.
While only time will bear out the true consequences of current policy and political economies, the stakes are high. In short, in the last era of great power competition the United States bested the Soviet Union while dominating global R&D and concentrating R&D within the federal government, and specifically within DOD and defense science and technology research. After several substantial changes to the threat landscape, the United States once again faces a world of great power competition.
This time, however, American R&D has eroded relative to other defense spending while that of our primary competitor, China, has shifted inversely. Internally, the U.S. government and DOD have both ceded relative ground while business R&D has grown. In large part this has been animated by deeper, secular economic shifts. While such changes have defined the twenty-first century thus far, it appears that only with the return of great power competition has the DOD aimed to alleviate its relatively atrophied in-house R&D capacity by piggybacking on business R&D. It is premature to evaluate such a strategy, yet since the current moment is an unprecedented combination of great power competition without dominant defense R&D it appears to be something of a gamble.
The United States has doubled-down on this gamble for the last five years of renewed great power competition. Yet, given the stakes of the Chinese threat, increased investment in science and technology research now, while a bit behind, will prove useful. If, as in the Cold War, the threat to the United States from a rival great power may dominate a large part of the century, such funding is wise policy. Writing in 1990, Colin Norman found near consensus among experts on defense R&D that despite the end of the Cold War, science and technology research should have been increased, rather than decreased, as a hedge. 
As Lewis Branscomb, a former chief scientist at IBM, government official, and academic argued: “You have to assume that there is some risk that the Cold War will reappear, or that in twenty years’ time, some future enemy will materialize and you will have to restore [defense] capability. If you do not have the knowledge base to restore capability, you are in bad shape.”  Branscomb’s fears have proven prescient. Perhaps twenty years’ time may find them no longer relevant given the success of commercial U.S. R&D and DOD efforts to capture this work. On the other hand, two decades from now, Americans may wish their government had started rebuilding science and technology research today. Honest American introspection of our current vulnerability, however unfamiliar and discomforting, and awareness of the rising Chinese threat suggest that in any case this is an investment that could not be more prudent, and urgent.
Colin Gray-Hoehn was the Director of Programming for the AHS Chapter at Harvard College, from which he graduated in May 2021 with a degree in Government and a minor in European History, Politics, and Societies.
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 Hereafter, “defense R&D” is to be taken to refer to U.S. federal defense R&D unless otherwise specified.
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Image: “Jute Softening Machine from Encyclopædia Britannica (11th ed.), v. 15, 1911, pp. 603”, retrieved from https://commons.wikimedia.org/wiki/File:EB1911_-_Jute_-_Fig._4.%E2%80%94Jute_Softening_Machine.jpg, image is in the public domain.