On the morning of August 1, 1943, a strike force of 178 B-24 four-engine bombers lifted off from airfields in North Africa to attack the German-controlled oil refineries in Ploiesti, Romania, Nazi Germany’s main source of petroleum. The target was defended by one of the largest and best-integrated air defense networks in Europe, consisting of two regiments of antiaircraft guns and 57 fighter aircraft.
Of the 167 bombers that reached the objective—navigation being an inexact science before GPS—53 were destroyed and 55 damaged. By today’s standards, it was an unthinkably large loss rate, not just of human life but of advanced weaponry as well. In 1943, the B-24 was perhaps mankind’s most complex and sophisticated mechanical device in series production, containing 1.2 million parts. But a large percentage of these aircraft were now shattered hulks littering Hitler’s Fortress Europe, or damaged, barely flyable airframes that had limped back to their bases and were suitable only for scrapping.
But the material losses were barely a blip in the prosecution of the war. Consolidated Aircraft, the B-24’s original manufacturer, produced approximately 10,000 of them at two of its plants during the war. Even so, the War Department was not taking any chances: It contracted for a second source with Douglas Aircraft’s Tulsa, Oklahoma, plant, and then expanded production even further.
At Willow Run, Michigan, the Ford Motor Company constructed a mammoth facility with an assembly line more than a mile long; it was the largest factory under one roof in the world. By mid-1944, the Michigan plant was producing one B-24 an hour, meaning that the B-24s destroyed over Ploiesti could have been made up with just over two days’ production at a single plant. Altogether, 18,482 B-24s were produced during the war, the highest-ever total for a four-engine aircraft. The Arsenal of Democracy was no mere propaganda slogan.
Eighty years later, America’s arsenal is in much the same shape as the remains of the Willow Run plant: underutilized for decades, and gone to seed. In 2010, most of it was demolished. Russia’s invasion of Ukraine administered a comprehensive shock to the post–Cold War consensus in so many respects: the idea that NATO, the EU, and other European institutions had banished the prospect of a major war on that continent; the notion that global free markets would lead to political convergence and improved behavior by countries like Russia; and even the illusion that world grain markets were resilient and self-equilibrating. Not least among the casualties of the invasion was the belief that the United States was unchallengeable militarily.
The United States faces an unprecedentedly massive buildup of Chinese military power in East Asia. But war games demonstrate that the U.S. would deplete essential munitions within just eight days of engaging in a high-intensity conflict with China concerning Taiwan.
To date, the U.S. has transferred more than 3 million 155 mm artillery rounds to Ukraine. This is one of the most basic items of war—the 155 has been around in various iterations since World War I. Yet for two years, the U.S. Army has been gravely concerned about the depletion of the ammunition stockpile, and with good reason. Current annual production of the 155 round is about 12 percent of the amount that has been transferred to Ukraine. Manufacture takes place at a single complex, more than a century old, in Scranton and Wilkes-Barre, Pennsylvania, though a new plant in Mesquite, Texas, that’s still under construction will soon double U.S. output. Even planned surge production, however, will require several years to rebuild the inventory because of the lead time needed to set up new manufacturing capability. With no ammunition, the Army’s M109 self-propelled howitzer would merely be 28 tons of scrap metal.
Each 155 mm round needs a propellant charge to send it out the gun tube as well as requiring a 22-pound explosive charge within the projectile. M6 propellant is no longer produced in the United States, nor does the military have a single TNT plant for the explosive; until it can reestablish domestic production, the Army will have to rely on allies like Poland and Australia.
By contrast, Russia, with a GDP at purchasing power parity of less than a tenth that of the U.S. and the EU combined, is able to produce nearly three times the number of artillery rounds as America and Europe can collectively manufacture. The democracies are learning the hard way what Joseph Stalin meant when he called artillery “the god of war.”
Replenishment time is much the same with many other munitions sent to Ukraine, according to a study by the Center for Strategic and International Studies. It estimated that expended units of the Javelin antitank missile will require five and a half to eight years to replenish; the HIMARS guided rocket, two and a half to three; the Stinger antiaircraft missile, six and a half to an incredible eighteen. The verdict is damning; for all the money thrown at the Pentagon, the Department of Defense cannot supply weapons for a conventional land war of moderate size and intermittently high intensity for much longer than a year without drawing down munition stocks to dangerously low levels. How, then, can it hope to deter an adversarial power of the first rank like China, which could potentially conduct a major, very high-intensity war on multiple fronts? War games demonstrate that the United States would deplete essential munitions within just eight days of engaging in a high-intensity conflict with China concerning Taiwan.
The United States has entered possibly the most complex foreign policy crisis since World War II. America must successfully aid Ukraine, or it will encourage further Kremlin adventurism and possibly collapse NATO. Simultaneously, it must deter adversarial powers in the Middle East. At the same time, it faces an unprecedentedly massive buildup of Chinese military power in East Asia.
Those who have advocated abandoning Ukraine to concentrate on China are proffering a false and meretricious choice. Without resolute support to Ukraine, any guarantees to Taiwan or other East Asian partners would likely be seen by adversaries and allies alike as worthless and would upset the entire calculus of U.S. deterrence strategy. Yet it is also undeniable that in aiding Ukraine, America’s material deterrent power worldwide decreases by the day absent a thorough transformation of the Defense Department’s shockingly thin and fragile industrial base and a stiff jolt to the Pentagon’s complacent culture.
America’s deficit in weapon manufacturing is not limited to ground forces equipment used in Ukraine. The U.S. Navy is in a protracted, slow-motion crisis: America’s shipbuilding base has shriveled to virtually nothing, while its aging workforce diminishes as employees reach retirement. (It doesn’t matter how much money Congress pours into shipbuilding if contractors lack skilled workers; training to make welds on naval nuclear power plants takes a year and a half to two years.) Cost growth per ship is such that the Navy cannot realistically afford to build at the same rate as the Chinese. Perhaps most depressing, the Navy has apparently forgotten how to design and build ships: Two classes that were supposed to revitalize the surface fleet, the Zumwalt-class destroyer and the littoral combat ship, have been unmitigated disasters.
U.S. shipbuilding has become so decrepit that Secretary of the Navy Carlos Del Toro said he was “floored” by South Korea’s shipbuilding capacity and skill after a recent visit there. Among other things, he was impressed by that country’s fully digitized monitoring of the production process that allows South Korean firms to predict to the day when a ship will be delivered. That capability is well beyond U.S. shipyards.
A decline in the number of naval shipyards, the virtual extinction of commercial shipbuilding, the loss of specialized suppliers, and the drastic reduction of the Navy’s in-house design capability have all combined to produce a perfect storm. Ships worn out from two decades of extended deployment in the Middle East’s “forever wars” need repairs and service life extension overhauls, but the waiting list is years long, while new vessels are well behind schedule. President Ronald Reagan’s vaunted 600-ship fleet has become a hollow navy of 293 ships and falling.
America’s defense industrial base has coevolved with what the military historian Russell Weigley called “the American way of war.” Since the Civil War, American military operations have been marked neither by consistently brilliant generalship, daring strategy and tactics, nor even an expectation of outstanding performance at the small-unit level, although these have been on display often enough. The U.S. Army’s infantry training did not match the thoroughness of the German army’s until roughly mid-1944, when 125,000 U.S. casualties in the Normandy campaign finally led to more realistic training.
Even American weaponry, although generally of high quality and good reliability, has not invariably proved superior to that of the enemy. Many World War II tank crews complained that the standard M4 Sherman could not fight on equal terms with the most modern German tanks, and pilots of the first generation of American fighter jets got a rude surprise when they met the Soviet MiG-15 in the skies over Korea. In Vietnam, early models of the M16 rifle, firing a cartridge containing powder that fouled the weapon, had a frequently fatal tendency to jam in combat, whereas the Soviet AK-47, cheaply made of stamped metal parts and having tolerances so loose it would not be accepted by a U.S. ordnance inspector, was supremely reliable in the dust and mud of Indochina.
Where the United States excelled above any other nation was in the sheer quantity of war materiel that it could produce, and a superb logistics system that could get it where it was needed on time. If the Sherman wasn’t as proficient as the German Tiger one on one, the Americans could generally bring several tanks to the fight for each German tank and overwhelm it—that is, if the American airpower soaring over Europe hadn’t already taken it out. Even reaching the combat zone might have been impossible for the enemy; relentless U.S. bombing rendered the Germans so short of fuel that their tanks and other vehicles were frequently immobilized. The industrial warfare America had mastered was summarized in the poem “A Bower of Roses,” by Louis Simpson:
For every shell Krupp fired
General Motors sent back four.
This American way of war was practiced throughout the Cold War. From the 1950s through the 1970s, the U.S. government subsidized robust commercial and military shipbuilding industries, applied strict antitrust enforcement to the defense contracting industry to preserve robust competition, and maintained large stockpiles of the weaponry, ammunition, and metals needed for specialized production. Even in the mid-1980s, American war planning for a Soviet invasion of Europe called for 10 divisions to be moved to Europe in 10 days, a logistical feat of staggering complexity.
The collapse of U.S. commercial shipping and decline in stocks of war reserve materials from the 1980s onward meant less equipment and far fewer American-flagged ships to deliver it overseas. By 2017, the Army’s logistical capabilities had deteriorated to the point that it would require more than 40 days for a brigade (no more than a third the size of a division) to unload equipment, get organized, and move to the front—not even counting the time it would take to assemble the unit stateside and cross the Atlantic.
Is this dramatic erosion in munition stocks, production capability, and proficiency at mobilization and deployment a result of a lack of resources? The Institute for Policy Studies estimated in 2021 that beginning with the defense buildup after 9/11, the Defense Department spent a cumulative total of $16.3 trillion. Adding appropriations for the next two years, we arrive at $18 trillion. In constant-dollar terms, annual post-9/11 military funding is higher than the Cold War average, and exceeds earlier peaks of spending (the Korean War, Vietnam, and the 1980s buildup). What’s more, it has sustained itself at this high level for more than two decades, much longer than the earlier buildups.
If lack of funding were responsible for the Defense Department’s sorry state of military and industrial readiness, then no amount of money could solve the problem. The sclerosis that set in after the end of the Cold War was a symptom of a fundamental shift in the American way of war, the role of the military in American society, and, perhaps above all, the gradual but profound transformation of the American economy in recent decades. No single decision eroded the defense industrial base, nor were the causes always confined to the Pentagon’s sphere of control. It happened in stages, over several decades, with leaders in both parties contributing to the slow-motion disaster.
The number of books and articles analyzing the ideological movement that began around 1980 and resulted in the financialization of the U.S. economy at the expense of manufacturing would fill a good-sized library. The controlling ideas of Reaganism were, of course, an eagerness to spend big on national defense, but also an anti-government libertarianism that refused to see a healthy industrial base as necessary to the nation’s well-being. It created wealth beyond measure while spawning ruination in industrial towns like Detroit and Youngstown, and produced more than 800 American billionaires even as it helped generate the political alienation and bitterness that threaten the unity of the country. Arguably, it represents the most significant paradigm shift in American society in the country’s post–World War II history. It is impossible that the onetime arsenal of democracy could have emerged unscathed.
The defense buildup during Ronald Reagan’s presidency seemed at first glance to be a golden era for the defense industry; production of everything—tanks, ships, aircraft, every kind of defense equipment—increased at a healthy rate. Defense budgets grew so quickly that the Pentagon couldn’t spend the money fast enough: This led to the mini-scandal of the merged surplus accounts at the Department of Defense, which hoarded billions of dollars that Congress appropriated rather than either obligating the money or sending it back to the Treasury. Even so, defense companies were now flush with cash—which, as it turned out, could also be a liability, given the nature of the era’s libertarian economic fads.
In the 1980s, Milton Friedman’s holy grail of shareholder value became the received wisdom. In its wake came all the schemes that permeated business during that decade: leveraged buyouts, hostile takeovers, outsourcing, downsizing, and share buybacks (which had been all but prohibited as a form of stock manipulation until Reagan’s Securities and Exchange Commission eased regulation in 1982). The defense industry and its second-tier suppliers, their values artificially inflated by the bonanza gushing from the Pentagon, were ripe for leveraged takeovers and other financial stratagems. What had once been considered an independent and even sinister leviathan (popularly called the military-industrial complex) was now a subordinate of Wall Street’s dictates.
In addition, the Reagan administration, under the influence of Robert Bork, turned antitrust enforcement on its head and essentially stopped enforcing antitrust law. This began an era of government waving through corporate mergers that was radically different from the previous 50 years of practice and has only been significantly curtailed under President Joe Biden.
In a sign of what was to come, in 1982 Chrysler sold its defense business (which was profitable, as it had recently won the Abrams tank contract) to the defense conglomerate General Dynamics. Why sell a profit center? The Federal Reserve’s high interest rate policy had left the company’s auto business teetering on the brink of bankruptcy while the Reagan buildup had goosed the value of its defense operation. Fourteen years later, Detroit Arsenal, the plant where Chrysler had produced 22,000 tanks in World War II, closed, leaving the General Dynamics plant in Lima, Ohio, as the sole tank production site.
The 10 largest defense companies in the mid-1980s were McDonnell Douglas, General Dynamics, Rockwell, General Electric, Boeing, Lockheed, United Technologies, Hughes, Raytheon, and Grumman. By 2000, the top tier was reduced to five: Boeing, Lockheed Martin, General Dynamics, Raytheon, and Northrop Grumman. Most of these resulted from mergers with other large defense companies, reducing both capacity and competition. This has led to an oligopolistic concentration: In 2023, the top six Defense Department contractors received almost $200 billion in revenue in the defense business, with much smaller figures booked by all the rest.
In the 1980s, Milton Friedman’s holy grail of shareholder value became the received wisdom. The defense industry was ripe for leveraged takeovers and other financial stratagems. What had once been considered an independent and even sinister leviathan was now a subordinate of Wall Street’s dictates.
While the Reagan administration was pouring money into defense, its libertarian zeal proceeded to undermine the industrial base supporting defense. Among the first acts of the administration was to end subsidies for commercial shipbuilding and phase out operating subsidies for American-flagged commercial carriers. These subsidies were a particular bugaboo among libertarians like Reagan’s Office of Management and Budget director, David Stockman, whose fantasy budgeting made him synonymous with voodoo economics. This attitude ignored the fact that since the mid-20th century, any country that wished to be a maritime power had to provide government support. Predictably, U.S. commercial shipbuilding collapsed after 1981.
No commercial shipbuilding means no production facilities or skilled labor that the U.S. Navy could use in a surge; no operating subsidies means no reserve of American mariners for ocean transport to overseas theaters. China, which subsidizes commercial shipbuilding, now has nearly 50 percent of the global commercial vessel market; its 20 large shipyards can produce both naval and commercial ships. U.S. commercial shipbuilding accounts for roughly a tenth of 1 percent of that market.
Another manifestation of Reagan-era libertarianism reshaping the U.S. defense base was the late-1980s effort to close what were regarded as unneeded military bases and facilities. To obviate Congress’s ability to arbitrarily pick and choose which bases to close in legislation, most proposals called for unneeded bases to be selected by an independent commission, with Congress getting only an up-or-down vote on the entire list of bases.
Dick Armey, the libertarian congressman from Texas, was the principal driver of the idea. His Base Closure and Realignment Commission (BRAC) process was accepted by the Pentagon bureaucracy and made law. Five rounds of base closures were authorized: in 1988, 1991, 1993, 1995, and 2005. Altogether, more than 350 closures of major bases and facilities were undertaken; while many, perhaps the great majority, could be justified, the Defense Department let too many valuable facilities go while consistently underestimating costs and overestimating savings.
In particular, it closed too many maintenance facilities, with a long-term effect on equipment. The Air Force’s aircraft mission-capable rates have stagnated for years in the low 70 percent range—well below what would be needed in a crisis, particularly as the size of the aircraft fleet has steadily declined for more than 30 years. The problem is extremely acute in the Navy. According to a 2023 Government Accountability Office report, between 2011 and 2021, 10 classes of Navy ships experienced reduced steaming hours—meaning presence worldwide—while maintenance delays have increased. In the attack submarine force, the maintenance backlog has become a crisis: A 2023 Congressional Research Service report noted that 37 percent of the Navy’s attack sub force is unavailable for service, and that the problem is expected to worsen.
If the 1980s were the beginning of the decline of the defense industrial base, the 1990s kicked it into a freefall. In 1993, Secretary of Defense William Perry called together the CEOs of the major military contractors at his dining room at the Pentagon. In what became known as the “last supper,” Perry warned that pending defense budget cuts would lead to a sizable contraction of defense firms.
John M. Deutch, then undersecretary of defense for acquisition, shifted the process into high gear by creatively construing federal acquisition regulations to permit defense companies to charge the Pentagon for the costs of these mergers and acquisitions. He claimed that he was merely clarifying existing federal acquisition regulations about allowable costs. But former Assistant Secretary of Defense Lawrence Korb has argued that the Defense Department had heretofore never allowed merger costs to be billed to the government, and that the Pentagon’s own career professionals disputed Deutch’s rationale. The gambit, largely worked out in secret, became a fait accompli. Critics, including tens of thousands of defense workers who were made redundant, called it “payoffs for layoffs.”
Perry’s comments that night can be seen as the starting point for a wave of mergers and acquisitions that dramatically changed the industry landscape—in a 2005 paper, Pierre Chao, then at the Center for Strategic and International Studies, noted, “By the end of the 1990s, 107 firms had become five”—creating the current top-heavy defense industrial base.
An estimated 400 mergers a year occur among defense companies, with oversight barely provided by two Pentagon employees. Partly as a result, 51 major aerospace and defense contractors in the 1990s became five. The number of airframe producers has fallen from eight to three. Ninety percent of missiles now come from three contractors.
China, which subsidizes commercial shipbuilding, now has nearly 50 percent of the global commercial vessel market; its 20 large shipyards can produce both naval and commercial ships. U.S. commercial shipbuilding accounts for roughly a tenth of 1 percent of that market.
Following the imperatives of lean manufacturing, companies have little slack to support a production surge. Now that the Ukraine war has uncovered a serious shortage of Stinger air defense missiles, the Defense Department has second-sourced production of the missile, built by RTX (formerly Raytheon), to Lockheed Martin. But it will take five years to get a significant bump in production; no reserve of production capacity exists, and it will be difficult to find and qualify subcontractors for the various components.
Two decades after the “last supper,” Perry conceded that defense mergers had gone too far—without, however, fully owning up to his damaging role in initiating and incentivizing the process, and backing Deutch against the Pentagon’s own professional staff. At the same time, as the Pentagon was giving defense companies financial incentives to merge, Congress made its own contribution to bad policy. Hell-bent on balancing the budget by any means necessary, the Newt Gingrich–led House induced Congress to undertake sizable annual sales of the National Defense Stockpile. (Ironically, the budget came into balance by itself in 1998 owing to a flood of revenue from the tech boom; it unbalanced again due to George W. Bush’s tax cuts in 2001.)
The stockpile was established just before World War II to buy and store domestically unobtainable minerals and other raw materials necessary for defense production in case of an emergency. Throughout the Cold War, the Defense Department stockpiled reserves of minerals like chromium (which makes corrosion-resistant steel), cobalt (an essential additive to alloys in high-temperature environments like jet engines), and manganese (a hardener for steels that make armor plate); none of these minerals is available in commercially worthwhile quantities in the United States.
From my former position as a congressional staff member, I was an observer at the stockpile fire sale. Most of that decade was a period of depressed raw material prices before the 2000s boom in commodities driven by Chinese demand; the proponents of the sales had an uncanny genius for selling commodities like palladium precisely when prices were at their nadir. Congress also sold Naval Petroleum Reserve No. 1 at Elk Hills, California, in 1997, when a gallon of gas averaged about $1.20. The Teapot Dome scandal of the 1920s shook the administration of Warren G. Harding—but Elk Hills went under the hammer with barely a ripple of adverse publicity.
An estimated 400 mergers a year occur among defense companies. Partly as a result, 51 major aerospace and defense contractors in the 1990s became five. The number of airframe producers has fallen from eight to three. Ninety percent of missiles now come from three contractors.
According to the Congressional Research Service, the value of the stockpile was $9.6 billion in 1989 but declined to $888.1 million in 2021. Commodity reserves had dwindled to the point where the Defense Logistics Agency reported that “less than 10 percent of postulated wartime material shortfalls are estimated to be mitigated.” In 2022, Congress appropriated $125 million for the stockpile, the first infusion of money in three decades.
Osama bin Laden’s September 11, 2001, attack on the United States ushered in the next phase of the systematic dismantling of the American way of war and the defense industrial base that sustained it. Al-Qaeda possessed no tanks, warplanes, or heavy artillery, and the Taliban who harbored bin Laden were hardly better armed. The U.S. military took control of Afghanistan in a matter of weeks, largely with the use of Special Forces. Saddam Hussein’s more heavily equipped forces in Iraq didn’t fare much better. In both countries, Washington’s goal was an ill-defined pacification rather than traditional victory, and U.S. forces adapted accordingly. There were plenty of sharp engagements, but on the whole, the military settled down to a constabulary role—the British experience in Northern Ireland, but on steroids. General officer promotions were based on perceived success dealing with insurgencies rather than large conventional conflicts, and these senior officers now dominate the military.
During this period, the Department of Defense comprehensively retooled the services—the Army in particular—for insurgency warfare. Its tactical doctrine for fighting a near-peer competitor in a conventional war languished as training concentrated on combating guerrilla forces. Funding for insurgency operations followed: The Congressional Research Service estimates that $1.55 trillion was spent on contingency operations in Iraq, Afghanistan, and lesser deployments in the war on terrorism between 2001 and 2019. That represented the opportunity cost of money not spent on new-generation weapons or war reserve materials.
The Bush administration’s single-minded focus on counterinsurgency operations against non-state actors led to fateful decisions about which future weapons would equip the military. Only months after 9/11, then Secretary of Defense Donald Rumsfeld canceled the planned Crusader self-propelled howitzer on the basis that heavy artillery was cumbersome and did not possess the required “transformational” capabilities for modern combat.
The Crusader would have been able to fire a conventional “dumb” (unguided) 155 mm round in excess of 40 kilometers. Rumsfeld’s solution was to tout the Excalibur rocket-assisted guided projectile, which could be fired from legacy howitzers, and which also had a range beyond 40 kilometers. These have been employed in Ukraine, but their unit cost of $100,000 makes them prohibitively expensive for general purpose use in a conflict in which artillery rounds are expended by the millions. The Excalibur also has GPS guidance that is subject to enemy jamming (dumb rounds are not), as the Ukrainians have discovered.
The Crusader, while not relevant to the type of insurgency war whose conduct Rumsfeld was busy bungling in Iraq, might have been highly applicable to the type of conventional war now being conducted in Ukraine. The Crusader could have fired vastly cheaper shells quicker than legacy systems; it could also have disengaged and changed positions more rapidly than the current Paladin self-propelled howitzer, let alone the towed M777 cannon. Rapidity of fire and quick movement are critical to the survival of artillery on a modern battlefield, where enemy surveillance drones can instantly detect artillery fire and rapidly call in counterfire.
Barack Obama’s administration continued its predecessor’s concentration on insurgency war. In 2009, Obama’s secretary of defense, Bob Gates, initiated “deep cuts in many traditional weapon systems but new billions of dollars for others, along with more troops and new technology to fight the insurgencies in Iraq and Afghanistan,” as The New York Times reported. Among the reductions was a cutoff in production of the F-22, the only fully mature fifth-generation fighter. (The fifth-generation F-35 is now in service but still experiencing problems in getting all its high-tech features working properly; the Chinese Chengdu J-20 and Russian Sukhoi Su-57 are examples of adversarial fifth-generation fighters.)
At the time, Rumsfeld’s and Gates’s decisions seemed to make sense in the context of a deemphasis of potential major conventional conflict with Russia or China in favor of counterinsurgency. They made calculated bets that the future (meaning a time span stretching from the point of their decisions through the service lives of the weapons their decisions affected) would look much the same as the world in 2002 or 2009. But the world of the 2020s appears to more closely resemble the Cold War, or even 1939. That the armed forces might have the wrong training, the wrong weapons, or not enough of the right weapons for this new era is due in part to the Bush administration’s having turned retribution against al-Qaeda into a quixotic and futile military occupation in the Middle East.
Focus on insurgencies hasn’t been the only problem. Since the early 1990s, planning for conventional wars even against large hypothetical foes was built on the model of Operation Desert Storm in 1991, whereby U.S. forces quickly overwhelm the enemy in a blitzkrieg of high-tech weaponry, electronic warfare, and rapid movement. This short-war theory was perhaps best characterized by Rumsfeld’s boastful prediction of “shock and awe” before the 2003 invasion of Iraq. If that operation provided only an illusion of success until the war morphed into a guerilla insurgency quagmire, it would likely be even less effective against a Chinese adversary with a military force structure larger than that of the U.S., and one that is lavishly equipped with weapons produced by the largest manufacturing base in the world.
Beginning with World War II, the United States has sought technological superiority over adversaries. But this doctrine was combined with a substantial force structure supported by an extensive industrial base. With the end of the Cold War, however, force size was significantly decreased while the acquisition system sought to develop a series of technological magic bullets. These wonder weapons frequently had a gestation period of well over a decade and were produced in small quantities, often by a single source—that is, when they worked at all.
The problem was compounded by the Defense Department’s typically granting only one-year contracts to makers of artillery and other simple weapon systems, reserving multi-year contracts for more advanced and expensive systems, like ships. Munitions have historically served as a billpayer—the Pentagon cuts back on purchasing them when budgets are tight to preserve money for more advanced weapons. This creates a roller coaster of munition production in which private industry struggles to maintain its workforce and keep plants operating: On the eve of the Ukraine war, the Army cut its request for 155 mm ammunition almost in half compared to the previous year’s appropriation. (The Biden administration has recently begun changing these practices: For the first time, the Defense Department is petitioning Congress to make multiyear purchases of artillery instead of awarding one-year contracts.)
Munitions have historically served as a billpayer—the Pentagon cuts back on purchasing them when budgets are tight to preserve money for more advanced weapons. This creates a roller coaster of munition production in which private industry struggles to maintain its workforce and keep plants operating.
The problem has become especially acute in light of the war in Ukraine, which has demonstrated that an enemy inferior in most technological areas might still prevail if it outnumbers its adversary, is casualty tolerant, and brings massive firepower to bear. In the naval arena, our admirals are now sounding the alarm over a Chinese fleet that has more combatant ships than the U.S. Navy; the last time another power possessed more vessels than our navy was during World War I. Recent efforts to match Chinese shipbuilding rates have faltered over poor design, bets on risky and immature technology, cost increases, and schedule slips.
An infamous example of a magic bullet that became a dud when fired is the Zumwalt-class destroyer. One of its key missions was long-range shore bombardment, for which it would need a specially designed gun. After building three ships at an eye-watering total program cost of $22.5 billion, the Navy canceled the program when it stumbled on the fact that the gun—around which the entire ship had been built—used ammunition that was too expensive to use on a wide scale. The three completed hulls are still searching for a mission. The same money could have bought 10 perfectly serviceable Arleigh Burke–class destroyers at a time when the Navy’s leadership is scrambling to find enough vessels to compete with the relentlessly growing Chinese fleet.
Until the collapse of the Soviet Union, the Navy could design ships competently. But the early-1990s downsizing of the Pentagon workforce—combined with the new fad, taken from civilian business management theories, to outsource work to private industry—led to a drastic loss of skills.
How was such an egregious error possible? Evidence points to a decline in in-house expertise across the U.S. Navy. Until the collapse of the Soviet Union, the Navy could design its own ships in a competent manner. But the early-1990s downsizing of the Pentagon workforce—combined with the new fad, taken from current civilian business management theories, to outsource work to private industry—led to a drastic loss of skills. The Navy reduced its organic staff of naval architects and engineers from 1,200 to 300, resulting in design and production issues not only with the Zumwalt destroyer, but with the littoral combat ship as well. Each LCS ended up costing more than twice the original estimate after slipping its schedule several years and constantly breaking down due to propulsion issues; many of them are now being retired at less than half their projected 25-year service life.
To replace the ill-starred LCS, the Navy chose the Constellation-class frigate. It was originally supposed to have 85 percent commonality with the FREMM frigate already in service in European countries. The Navy awarded a contract in 2020 to build the lead ship, but has since issued so many change orders that there is now less than 15 percent commonality with the FREMM. It is hardly surprising that the program is running three years late.
The Navy is not the only service responsible for such disappointing outcomes. Between 1995 and 2009, the U.S. Army spent $32 billion on programs related to its Future Combat Systems program with little to show for it. FCS was supposed to create new manned and unmanned combat vehicles linked by a fast and flexible battlefield communications network. Currently, the burden of ground combat is still borne by the M1 Abrams tank and the Bradley Fighting Vehicle, both designed in the 1970s.
Had the Army been able to develop, produce, and field FCS (which included unmanned vehicles) in a timely and cost-effective manner, it might have provided a solution to the incredible lethality of high-intensity conventional war. For years, the general opinion has been that the Abrams tank is nearly invulnerable, but the ubiquity of both surveillance and strike drones over the battlefield has emphatically disproved that belief. Already, five of the 31 Abrams tanks sent to Ukraine have been lost to enemy action.
Because of their prolonged development period, technical complexity, and high unit cost, each generation of a given weapon type almost invariably sees fewer numbers produced than those of its predecessor. These small production runs lead to fewer and fewer specialized suppliers who will only facilitize their plants for what are essentially craft rather than assembly line processes. The same applies to the subcontractors that produce components. Most of American commercial manufacturing is only willing and able to gear up for large production lots of a stable design—and all the services are notorious for inundating contractors with a myriad of change orders after the design is already approved for production.
Following the imperatives of shareholder value is supposed to make for a successful company. The sad case of Boeing shows how it can destroy a business and the culture of excellence it had in the past. It was once the world’s premier aircraft manufacturer. Under the helm of the legendary Bill Allen, revolutionary projects like the 747, the world’s first jumbo jet, were a textbook lesson in managing a huge and complex project. Boeing is now the only remaining domestic manufacturer of airliners; it is also the fourth-largest defense contractor. Its 1997 merger with McDonnell Douglas (actually a stealth takeover of Boeing by the same financial engineers in the McDonnell Douglas C-suite who had brought that firm to ruin) was at the root of Boeing’s reputational downfall.
The ongoing fiasco of Boeing’s commercial airliner business is well known. The 787 and 737 MAX, Boeing’s only two new airliners since the merger, have been riddled with poor workmanship, substandard or ill-fitting components and subassemblies, and, in the case of the 737 MAX, faulty software generally believed to have been responsible for two horrific crashes soon after the plane’s debut. It is no surprise that Boeing has been steadily losing market share to Airbus.
Boeing’s record with government contracts is hardly better. In 2002, Boeing attempted to lease air refueling tankers to the Air Force; the terms of the proposal (Defense Department buys major weapon systems; a lease was unprecedented) were so one-sided that it looked like a money grab. The deal fell apart, and an Air Force procurement executive landed in prison. When the Air Force ultimately put out for bid a requirement to buy (not lease) a new fleet of tankers, Airbus won, but an unchastened Boeing protested, and got the decision overturned. The resulting Boeing KC-46 tanker has been plagued with problems to this day.
It has been the same story with Boeing’s NASA projects. The Starliner crewed space capsule was years behind schedule, and more than a billion dollars over budget, before it successfully launched in June. One problem emerged this year when a mile of flammable tape in the crew compartment had to be removed, a serious safety issue that had somehow been overlooked. And the Starliner experienced helium leaks and problems with its thrusters on its journey to the International Space Station.
Did shareholder value take precedence over Boeing’s traditional safety culture? Over the past decade, the company has returned $59 billion to shareholders in buybacks and dividends. That represents $59 billion less to invest in plants and equipment, research and development, and retaining skilled production workers and engineers by rewarding them with higher pay. Without that reinvestment in infrastructure, Boeing has since its merger increasingly become a final assembler rather than builder of aircraft because it has lost the workforce and facilities to build most of an airframe in-house. It now farms out even major components all over the world to the lowest bidder.
The crowning example of how cost cutting came before any other consideration is Boeing’s move, shortly after the merger, to open a design bureau in Moscow to take advantage of the cheap labor. The operation grew to 2,000 employees. The company didn’t have second thoughts after Russia’s invasion of Georgia, its assassination campaign against dissident Russians living in NATO countries, its illegal annexation of Crimea, and even its shooting down a Boeing airliner carrying 298 passengers and crew. Boeing only pulled the plug after the invasion of Ukraine—temporarily, it said.
The acrimonious debate over the Affordable Care Act laid bare an ideological divide over the meaning of the preamble of the Constitution. Does the “general Welfare” of the American people mean that the health of the citizen is a collective responsibility for the common good, as in most developed countries, or it a business opportunity for health systems, insurance companies, and the hedge funds that control them?
National defense is no less a public good than policing or firefighting. The reasons for the number of howitzer shells to be produced, how many should be kept in inventory, and where the material inputs for the shells come from are totally different from the imperatives of free market forces driving the manufacture of washing machines or cell phones. Had the Army Industrial College in the mid-1930s recommended that Boeing outsource portions of the B-17 bomber to Imperial Japan, the idea would have met with outrage and accusations of insanity. Yet in 2022, the Defense Department suspended deliveries of the F-35 fighter—an aircraft intended to be the mainstay of the U.S. Air Force for decades—after discovering that components of the plane came from China. Layers of outsourcing to private-sector subcontractors and sub-subcontractors had masked the problem.
Clause 17 of Article I, Section 8 of the Constitution gives Congress authority and jurisdiction for the “Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings.” A plain reading of the text suggests an overriding governmental interest in and proprietorship over the infrastructure necessary for the common defense. The nature of modern warfare dictates that high-technology weaponry requires extensive assistance by the expertise available in the private sector, but at what point do private companies, driven by their own market imperatives, become the tail that wags the dog?
In World War II and the Cold War, the organic logistics of the U.S. armed forces may have been the one capability, even more than technology, that set it apart from other militaries. But beginning in the 1980s, contractors began to lobby the Department of Defense and Congress for pieces of the maintenance and repair mission, claiming that outsourcing to the private sector would reap cost savings; one by one, Army depots, Air Force logistics centers, and Navy shipyards—each of which was a large manufacturing and repair facility and an integral part of the industrial base—were closed and the work outsourced. In the hands of contractors, the promised monetary windfall never materialized, and, most egregiously in the case of the Navy, the work didn’t get done.
It is delusional to believe that the financialization and deindustrialization of the economy over the past four decades wouldn’t exact a toll on national defense. But Biden has signaled the beginning of the end of the era of divestment from manufacturing, offshoring, and downsizing.
Logistics to and in the theater of operations was also extensively privatized, to the point that the military is incapable of sustaining itself without in-theater contractors. Halliburton, the principal logistics provider in the Iraq War, became infamous for its overbilling and inadequate support of the soldiers—not to mention its political conflict of interest involving the Bush administration.
Logistics won’t function unless you have the item on hand when you need it. Once the business philosophy that holding inventory is a dead loss to the company became dominant, business inventories were slashed across the economy. Given the taxation of business inventories, it is to some extent true that they are a burden. Since the end of the Cold War, the same mentality in the civilian economy that exalted just-in-time delivery and reducing inventory to a minimum (which led to the supply chain crisis during the pandemic) infected the Defense Department, which disposed of mountains of alleged excess inventory of spare parts and other items.
It is delusional to believe that the financialization and deindustrialization of the American economy over the past four decades would not exact a toll on national defense. With the Inflation Reduction Act, the CHIPS and Science Act, and other measures, the Biden administration has signaled the beginning of the end of the era of divestment from manufacturing, offshoring, and downsizing. Even the Republican Party, which enthusiastically engineered many of the features of the postindustrial economy, is now ideologically split over laissez-faire economics. As the broader economy attempts to shift to a more resilient model, so must the Pentagon—and Congress, which is supposed to oversee it—find a new way to manage the defense establishment.
First, the Biden administration should impose on defense contracting the same vigorous renewal of antitrust enforcement that it is bringing to the wider economy. It took a good first step two years ago when the Federal Trade Commission blocked a proposed merger between Lockheed Martin and the rocket motor maker Aerojet. But curbing further consolidation isn’t enough. The maddening and disastrous inability of the Pentagon to procure sufficient quantities of even the most basic munitions, much less more complex weapon systems, can only be overcome by bringing more competition to the defense sector, and that will require a wholesale dismantling of the prime contractor oligopoly.
Second, the Defense Department must rebuild in-house expertise, as in the case of the Naval Sea Systems Command’s ship design capability. It must also recapitalize its system of depots, air logistics centers, and shipyards in terms of plants and equipment as well as personnel, and even open new ones if necessary. The Joint Chiefs of Staff and the Defense Logistics Agency need to reassess the materiel requirements of high-intensity warfare in light of the Ukraine war and develop a long-term, comprehensive plan to rebuild a war reserve inventory.
Third, the way in which the services build weapons must change. Absurd overspecification and unrealistic or outdated requirements have to be jettisoned, because they drive away potential bidders. Incessant change orders to designs already in production have to be curtailed.
The artillery shell famine is critical for the U.S. Army; for Ukraine, it is existential. Precision metal casting has greatly improved in accuracy in recent decades and would be a cheaper and quicker way to produce shell casings than the current process of forging and milling. But the Army has rejected the idea, with the excuse that it would be too onerous and prolonged to qualify the process and find a manufacturer. In that case, shouldn’t the service streamline the qualification process?
Fourth, the Defense Department should allow more prototyping, including initiatives by industry, knowing that many of them will fail; a multiplicity of designs will offer more options and potentially breakthrough technology. The P-51 Mustang, the most successful American fighter of World War II, was a clean-sheet-of-paper initiative by the contractor, North American Aviation. In 1940, the British Purchasing Commission wanted NAA to build the Curtiss Warhawk under license, but the company’s president said he could get a superior aircraft in the air quicker than it would take to establish a production line for the Warhawk. Only 102 days after the contract was signed, the prototype Mustang rolled out of the hangar.
Fifth, Congress should make annual appropriations to rebuild and make necessary adjustments to the composition of the National Defense Stockpile. The Defense Production Act of 1950 is due for reauthorization by 2025. It needs to be rewritten to suit current conditions and the present state of American industry; one expert believes that the Defense Department should offer loan guarantees under the DPA to help gear up private suppliers, something the Pentagon has previously refused to do. Congress should consider reinstituting commercial shipbuilding subsidies to broaden the Navy’s industrial base, as a retired Marine general has proposed in a U.S. Naval Institute paper.
Finally, does it require an act of Congress to mandate what ought to be common sense? The little-noted tale of Boeing’s design bureau in Moscow might be the worst example ever of profit-driven recklessness. Did it not occur to Boeing that it was setting up an operation in the country that practically perfected mass, government-directed cyberattacks and cybertheft? That its employees would have access to company passwords and might be Russian intelligence personnel? It’s not as if those cheaply obtained engineers made the 737 MAX a stellar aircraft.
Most of these reforms would cost money up front; a few of them could reap big recurring savings. Those would only materialize in the longer term. But Americans, and the Pentagon along with it, have been eating their seed corn for four decades. In Ukraine and the South China Sea no less than in the post-pandemic supply chain crisis, the bill for that gluttonous indulgence has come due.
