Second, it is relatively clear that current U.S. military capability
will shrink. Despite the pledges of the two major American political
parties to maintain or expand the current level of defense capability,
both the force structure and defense infrastructure are too large to
be maintained at even the present levels and within the defense
budgets that are likely to be approved. Unless a new menace
materializes, defense is headed for "less of the same." Such
reductions may have no strategic consequences. However, that is an
outcome that we believe should not be left to chance.

This shrinkage also means that the Pentagon's good faith strategic
reviews aimed at dealing with our future security needs may be caught
up in the defense budget debate over downsizing and could too easily
drift into becoming advocacy or marketing documents. As the services
are forced into more jealously guarding a declining force structure,
the tendency to "stove-pipe" and compartmentalize technology and
special programs is likely to increase, thereby complicating the
problem of making full use of our extraordinary technological
resources. This means that some external thinking, removed from the
bureaucratic pressures and demands, may be essential to stimulating
and sustaining innovation.

Third, the American commercial-industrial base is undergoing profound
change propelled largely by the entrepreneurial nature of the free
enterprise system and the American personality. Whether in information
or materials-related technology or for that matter in other areas too
numerous to count, the nature of competition is driving both product
breadth and improvement at rates perhaps unthinkable a decade ago. One
sign of these trends is the reality that virtually all new jobs in
this country are being created by small business. In the areas of