Economic conversion

Economic conversion, defence conversion, or arms conversion, is a technical, economic and political process for moving from military to civilian markets. Economic conversion takes place on several levels and can be applied to different organizations. In terms of levels (roughly corresponding to geographic scales), conversion can take place at the level of new innovation projects, divisions within multi-divisional firms, companies, and national economies. In terms of objects, conversion can govern workers (i.e. retraining), firms (in terms of workers, capital, facilities and real estate) and land (in terms of real estate). Some of these scales obviously overlap. Organizations that can be converted include defense firms, military bases, and defense laboratories.

Conversion should be distinguished from economic diversification although the two processes overlap. Conversion involves the maximum reuse of military committed resources, with the emphasis on reuse of existing personnel. The key personnel within defense firms are engineers and factory workers, and managers skilled in managing innovations. Another key emphasis in conversion is in the area of new product development. Diversification can involve financial manipulation, e.g. in purchasing new firms, which leaves in place existing commitments to military production. Sometimes however, economic conversion requires purchase of another firm to supply "complementary capacities." Generally, conversion can be supported by various factors that help defense firms overcome specialization.

Among the key periods associated with economic conversion have been the postwar conversion after World War II, numerous experiments in diversification (with conversion of defense engineers' skills) in the period after the Vietnam War in the 1970s, and similar efforts after the Cold War. Various militarist and corporate critics battled labor and peace advocates during these conversion openings, with the former usually winning the day.

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