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Economist John Kenneth Galbraith suggests that the defense industry, which includes many aerospace contractors, should be nationalized. He argues that "we recognize the reality of things, which is that the large, specialized defense contractors are really public firms." Under his plan the Government would buy out shareholders in any firm that reached a certain level of dependence on Government business by exchanging U.S. bonds for their securities. There is logic of sorts in Galbraith's idea: it would allow the nation to keep skilled teams intact by guaranteeing them steady employment, even in slack times.
On the other hand, the takeover of private corporations appeals to few Americans. "Government intervention is the problem, not the solution," says Economist Milton Friedman. "Has a nationalized Post Office worked well, or schools, or housing? The system we have is one of profits and losses, and the losses are just as important as profits." In other words, companies that cannot make it in the marketplace should drop out. A nationalized industry usually becomes a political plaything, not subject to the pressures for efficiency or the need for a profit. In addition, the ownership of defense companies is already so diffuse (stock in the 100 largest contractors is held by some 31 million persons) that nationalization would cause a great public outcry.
Another plan is for the Government to preserve the privacy of its dependent contractors but give them new kinds of work. Supporters of the idea suggest that the U.S. should pick out one of its seemingly insoluble problems, such as air pollution or the lack of mass transportation, and instruct an aerospace company to attack it in the same fashion as the ten-year moon project. The company would take on the problem, separate its components, analyze ways to deal with them, project a schedule for solution and build some of the hardware. Says Assistant Secretary Harold Finger of the Housing and Urban Development Department: "The industry's capability in hardware, software, management, planning, evaluation, analysis and programming—all can be applied to the national problems of housing, pollution, waste management."
The idea is also attractive because it has already shown glimmerings of success in some cases. The Aerospace Association's President Harr estimates that the industry now handles $2.5 billion worth of non-aerospace business annually, including urban studies, pollution control and housing. For example, the Rohr Corp., a subcontractor of airplane parts, two years ago began studying rail-transit problems and has since won a profitable, $66.7 million contract to construct cars for San Francisco's new rapid-transit system. Railroads of all kinds are the projects most often mentioned as possible conversion targets for the aerospace industry. Says Dr. Richard Michaels, research director of Northwestern University's transportation center: "There is no way to make rail passenger service profitable with the technology we have today. It is a natural problem for the space industry."