By Gabriel Yossick
Anti-World War II protest that unraveled in New York City on July 7, 1941
As the world set itself alight with World War II, it was in the marbled halls of the Senate Office Building where isolationist Senators gathered to keep America removed from these developments. Senators like William Borah and Arthur Vandenburg passed legislation like the Neutrality Acts which stopped President Franklin Roosevelt from sending arms to countries or civil war participants fighting against fascism. Roosevelt, garnering support for action, called for America to be “the great arsenal of democracy,” and to build the great “implements of war: the planes, the tanks, the guns… which will enable them [Europe] to fight for their liberty and our security.”
It would be Japan’s attack on Pearl Harbor on December 7, 1941, which would snap the nation out of its isolationist slumber. The rest is history, with America winning WWII and ushering in a new era of hot competition with the USSR. We should not wait for another Pearl Harbor to snap into action. America can redefine the role it plays globally by ensuring the defense industrial base (DIB) is competitive and innovative.
The DIB, as the name implies, is made of big names like Lockheed Martin, Boeing, Northrop Grumman, and Raytheon who oversee and create arms the US and its allies need to maintain its military capabilities. With regional conflicts on the rise, the DIB has been increasingly strained. At present, the DIB is unable to match the existing rate of supplying Ukraine and fulfilling orders from countries such as Taiwan that have already requested arms from the United States. 155mm munitions, Javelin missiles, and Stinger missiles are all below the needed replenishment rate. Even if these two countries are not directly competing for the same arms, there are sector-wide failures to address shortages across the board.
Ukraine alone has taken around $75 billion in financial, humanitarian, and military aid from the US, with the Biden administration asking for an additional $25 billion in funding for Ukraine. The war in Ukraine has shown the DIB has the ability to surge production, however, the DIB could achieve better returns. These better returns are being stalled by the same types of Congressional members who stalled US action in the 1930s.
Much like back in the 1930s and 1940s, Congress’s isolationists balk at the idea of supporting Ukraine. Prior to Pearl Harbor, all bills circulated in the chamber that remotely championed an internationalist perspective came under hot scrutiny, like the Lend-Lease Act. Senator Burton Wheeler would go on to call it “the new Triple A Bill… it would plow under every fourth American boy” and Senator Vandenburg would go as far as to say he “was witnessing the suicide of the Republic.”
Today, some isolationists are repeating the same language, with Representative Matthew Gaetz saying “the Biden administration is sleepwalking our great country into a World War.” In the same breath, these same Congressional members cry foul that the military is unprepared for serious war.
Fixing the DIB requires a little venture into the business world. Mergers and acquisitions (M&A) make the foundation of a dynamic marketplace; however, the DIB has seen historic consolidation with the number of defense prime contracting falling from 51 to 5, according to the DoD. This started from a go-ahead in the 1990s from DoD officials to industry for the consolidation of the largest defense firms after smaller and smaller defense spending.
Major weapon systems (MWSs) see the highest levels of concentration, with tracked combat vehicles seeing one prime contractor (General Dynamics), surface ships with two (General Dynamics and Huntington Ingalls), and strategic missiles with two (Boeing and Lockheed Martin). The DoD currently has little resources to evaluate M&As and their effects on the market, let alone study past merger effects. M&As peaked in 2015, and have stagnated only due to how consolidated the market currently is.
There are numerous options the DoD could adopt to solve the increased mergers: increase resources on monitoring M&A activities, expand support for value arms, and allow more interservice rivalry.
As mentioned above, the DoD is wholly unprepared for monitoring M&A activity and its effects on the defense industry. Currently, merger reviews are conducted by the Federal Trade Commission and Department of Justice, with the DoD being given permission to provide an assessment to these agencies if it feels a merger is particularly harmful. Given the low number of staff assigned to M&A management, only 40 mergers were assessed, out of 400 per year. Giving the DoD more staff to give assessments is key for improving consolidation within the sector.
Currently, defense firms make most of their money from what is called the total package approach, which focuses on providing lifetime support to equipment – especially for bigger and more expensive MWSs. This system leaves firms hooked on government support, and the government stuck in a sunk cost fallacy. As these are the only firms in the market, the government is further forced to rely on their systems.
The DoD can reverse this by embracing an expanded value arms market, which focuses on less complicated and cheaper weapons. The greatest shortfalls in the DoD’s stockpiles are not systems like the F-35, but Stingers or Javelins. Expanding support here would help with shortages, but also, the smaller firms who are present within this market. Likewise, encouraging service diversity in weapon procurement might create new demand for diverse weapons, unlike the jack-of-all-trades weapon systems (like the F-35) that have pleased no one. Interservice competition would also incentivize the services themselves to lower budgets and increase capabilities.
Congressional Research Service reports have found some interest among legislators in discovering the effects of DIB consolidation, but no major bill has decisively tackled the issue. The impetus for action is largely in the DoD’s court. This is not to say Congress is not responsible, they need to fund the department’s merger oversight, but the DoD needs to begin shifting its approach on how it interacts with large defense firms. This means helping the Davids of the world against the goliaths of Lockheed Martin or General Dynamics. How can we expect to help Taiwan or Ukraine, if we cannot even help our DIB from eating itself?