50 insights into the US military-industrial complex

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December 12, 2020

50 insights into the US military-industrial complex

The phrase "military-industrial complex" invokes images of secret collaborations between powerful corporatized weapons dealers and shadowy government agencies. In a lot of cases, those images aren't that far off. The United States Armed Forces could not be the most effective fighting force in world history without the private defense contractors that fill its orders and meet its needs. In fact, without private contractors, the U.S. military—and much of the government in general—would cease to function.

A significant amount of government work once done by public employees has been contracted out to private companies that promise to do it better and cheaper. Between 1996 to 2017, the number of government-employed contractors rose from 3 million to 4.1 million. The largest government contractor is Lockheed Martin Corp., a purveyor of defense, aerospace, security, and advanced tech, to the tune of about $48.3 billion in obligations. In this way, one could argue that American defense and homeland security represent the ultimate gig economies.

The arrival of the 21st century and the War on Terror witnessed a mass-expansion of private military contracts. The Department of Defense, the Department of Homeland Security, and other giant agencies began farming out every task imaginable to freelancers, from administrative tasks to highly classified, mission-critical work.

The U.S. military relied on private industry long before anyone had ever heard the term military-industrial complex (MIC). The second half of the 20th century, however, saw the rise of a new kind of arms dealer and a completely different arrangement between the military and its private vendors. Today, the lines between government and contractor are increasingly blurred. Former defense contractors and lobbyists routinely land high-ranking government defense jobs. Soldiers and special forces operatives find lucrative second careers in private defense and security firms. Intelligence and law enforcement agencies are populated with former military personnel who often transfer over to private-sector defense work. As much as these overlaps sowing public distrust and suspicion, so too has America's military-industrial complex remained shrouded in misinformation and mythology.

Using a variety of sources including government data, historical records, and news reports, Stacker developed a list of 50 insights that will separate fact from fiction as it applies to the enormous, powerful, and ever-growing American military-industrial complex.

The MIC is a concept, not an organization

Mythology aside, there is no official shadowy organization called the military-industrial complex. The term refers to a sprawling network of people and corporations that design, test, manufacture, and implement the systems, weapons, technologies, vehicles, software, and platforms that the U.S. military uses in its global missions. Although their work is often secret, the companies involved are often large, publicly traded firms whose shares are for sale on the stock market.

Eisenhower coined the term

President Dwight Eisenhower first used the term “military-industrial complex” at his farewell address on Jan. 17, 1961. In warning that the gargantuan arms industry was growing into a shadow government, he said, in part, “In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.”

MIC mythology conceals actual scandals

Eisenhower’s ominous warning fueled wild conspiracy theories about the arms industry that have been passed down through the generations and reinvigorated by the internet. MIC urban legends discredit real attempts to reform the cozy relationship between the military and the private companies that serve it for profit. Real scandals, like the government/industry revolving door, get lost in the clutter of conspiracy theories.

Eisenhower’s premonition came true and then some

Even Ike couldn’t have known just how large the forces he warned about would become. From intelligence and data collection to veteran care and cybersecurity, America’s defense has become so thoroughly privatized that “military” and “industrial” are no longer even accurate terms, according to The Washington Post. Some experts prefer to call it the “national security corporate complex.”

It's a modern concept

Eisenhower was correct in noting that, "This conjunction of an immense military establishment and a large arms industry is new in the American experience." Throughout most of America's history, private industry was converted to military production only when needed in times of war. As Eisenhower said, "American makers of plowshares could, with time and as required, make swords as well."

World War II changed everything

The arrival of the nuclear age and of America as a global superpower after World War II made the old model unsustainable. Making Ford and Chrysler switch to airplane engine production at the expense of all auto manufacturing after the war had already started had worked—but it wouldn’t in the future. America was approaching a permanent war footing with the Soviet Union.

Civilian manufacturers got out of the way

After the war, the U.S. and the world were thirsty for all the new household goods, appliances, cars, and many other things they went without during years of wartime rationing. For the companies that switched to war production during the conflict, it made financial sense to revert back to civilian production to meet the bottomless new demand. What is now called the military-industrial complex emerged to fill that void and make defense production a full-time venture.

The arms and space races supersized defense production

The Cold War created intense competition between the U.S. and the Soviet Union to hoard increasingly greater amounts of increasingly lethal and advanced weapons and technology. Defense spending soared and the manufacturers that concentrated on military production after World War II expanded and grew to meet that demand. They developed terrifying new weapons and made incredible achievements in shipbuilding, aeronautics, and space.

Defense production is domestic by nature

The 1970s and ’80s saw a huge shift toward foreign manufacturing, but America’s military defense can’t, of course, be an outsourced operation. As civilian manufacturing was lost to overseas factories, the defense contractors that stayed behind consumed a bigger share of America’s manufacturing pie. In the 1990s, defense contractors like General Dynamics considered making a move back to civilian production but decided against it because they correctly believed there was more money in weapons.

9/11 triggered massive new growth

The Sept. 11 attacks launched the United States into a state of permanent conflict. The wars in Iraq and Afghanistan fueled enormous increases in defense spending and contracts not seen since the Cold War. At the same time, America was rapidly growing its capacity to identify, surveil, and hunt terrorists and other clandestine enemies, and defense contractors would provide the tools of the trade.

Department of Homeland Security became a super-contractor

Before 9/11, the only executive branch departments with big military contracts were the Pentagon and the Department of Energy, but the 2002–03 creation of the Department of Homeland Security changed all that. DHS unified FEMA, TSA, the Secret Service, Customs and Border Protection, U.S. Citizen and Immigration Services, and the newly created U.S. Immigration and Customs Enforcement (ICE). All of those organizations saw a massive increase in private contracts, which would total $14 billion a year by 2005.

Government work became private-sector work

The years immediately after 9/11 and the creation of DHS witnessed a dramatic increase in work being farmed out to private contractors that had once been done by government employees. It wasn’t just DHS—agencies as varied as the Forest Service and the CIA began contracting out work they had previously done themselves. During President George W. Bush’s last year in office, the government awarded $500 billion in private contracts.

The MIC’s role expanded

The 21st century saw defense contractors expand far beyond their historic roles of manufacturing weapons, planes, and other hardware for the military. Traditional arms makers like General Dynamics and Lockheed Martin began taking on contracts for services like cyberwarfare, artificial intelligence, and even traditional work like bookkeeping.

The lines became blurred

As the military began extending contracts farther beyond its traditional realm, it became harder to define which companies, exactly, were part of the military-industrial complex. The post-9/11 wars, for example, created legions of new veterans, many of whom would have their health care outsourced to private companies by the VA. Today, three of the Pentagon’s 15 biggest contracts are with health care corporations, and DHS even hires private contractors to supervise the work of other private contractors.

The MIC evolved in the digital age

9/11 and the formation of DHS coincided with the rise of the digital age, which was changing the nature of defense interests like military logistics and communication. By the end of the 2010s, IT consulting giants like Booz Allen Hamilton would be among the biggest private contractors for the Pentagon, DHS, and the federal government overall.

MIC’s digital work was hardly limited to IT

Private contractors were instrumental in building the military’s huge 21st-century digital infrastructure, including powerful cybersecurity, cyber warfare, surveillance, and data-collection capabilities. Private contractors designed and administered wide-ranging technologies from facial-recognition software for use at airports to massive data-mining operations. It was all a part of a sprawling mass-surveillance network that existed at the intersection of the military, intelligence, and domestic law enforcement.

New economy corporate giants got on board

The Patriot Act gave law enforcement, the military, and intelligence agencies enormous power to leverage private companies to surrender their customers’ data. As data became more critical to America’s military and law enforcement missions, internet giants like Google, social media giants like Facebook, mobile giants like Verizon, and even retail giants like Amazon became critical components of the military-industrial complex. Many went along willingly, while others were prodded into compliance by new laws that offered few alternatives.

Conspiracy theorists say ‘I told you so’

In 2013, a leaker revealed a stunning and secret collaboration between private industry and America’s military intelligence—in this case, “conspiracy” would actually be a fitting term. The NSA used the Patriot Act to force internet companies to hand over mountains of data on American citizens without their knowledge for storage in searchable law-enforcement databases. The secret NSA programs, which had code names like “Boundless Informant” and “PRISM,” were revealed by Edward Snowden, one of 854,000 private defense contractors with a top-secret security clearance.

America’s cops got the MIC’s hand-me-downs

As America’s wars dragged on, the private contractors that supplied them continued to produce newer, better systems and hardware. The federal government doled out billions of dollars worth of surplus military vehicles, tactical equipment, and weapons to civilian law enforcement organizations large and small across the country. Police departments in towns like Ferguson, Missouri, could now conduct drug raids or respond to protests dressed as military soldiers, carrying military-grade weapons, and riding in armored vehicles built by defense contractors for use on foreign battlefields.

The MIC got its own army

There is no purer example of the merger between corporate America and the American military than the 21st-century rise of private mercenary armies like Blackwater. After 9/11, the military gave enormous contracts to private companies that recruited former soldiers and special forces operatives, trained them, equipped them, and offered their fighting services on a freelance basis. Instead of building weapons for soldiers to use in war, defense contractors were now fielding private armies of their own and renting them to the U.S. military.

Those armies go into actual battle

The role of private contractors in direct military operations became clear in 2004. That year, four armed Blackwater contractors were ambushed in Iraq, burned, dragged through the streets, and hanged from a bridge in Fallujah. The gory display embodied the chaotic violence that defined the growing insurgency and the changing nature of America’s increasingly privatized Armed Forces.

Rules of engagement became unclear

On the other side of the coin, Blackwater and other private mercenary groups were responsible for some of the war’s grossest abuses and violations—and their murky chain of command and rules of engagement were ripe for abuse. Since they weren’t active members of the military, contractor-soldiers weren’t bound by military law, but they weren’t bound by Iraqi law and since they were on foreign soil, they weren’t bound by U.S. law. Blackwater operatives were implicated in several ghastly civilian massacres during the war and cover-ups after the fact.

The definition of ‘American contractor’ changed

The Pentagon justified the use of mercenaries as a cost-saving measure—the military didn’t have to pay benefits or overtime, or offer paid vacation to Blackwater operatives and they brought their own gear and weapons. What the Pentagon didn’t advertise nearly as much is that military contractors really cut costs by employing foreign nationals. About 89% of the 2,000 private contractors working security at the U.S. Embassy in Baghdad, for example, were foreign nationals, and just 8% were American citizens.

A scary MIC shadow club emerged

What The Nation calls “a new cybersecurity elite” recently emerged as a kind of defense contractor all-star team from Eisenhower’s worst nightmares. Some contractors have been able to leapfrog through sensitive positions in the government, the military, organizations like the NSA and CIA, private security companies, consulting firms, energy corporations, mercenary armies, and tech security companies. Most have high-level military and intelligence training, and at each stop along the way, they pick up new state secrets before moving on to the next gig.

Global military dominance isn't cheap

It's important to understand just how much of the U.S. economy is dedicated to maintaining its war machine. About 15% of all federal spending and half of discretionary spending goes to defense, dwarfing discretionary expenditures like education, transportation, health, and services for veterans. In 2019, $686 billion of America's $716 billion national security budget went to the Department of Defense.

No one spends more on defense than America

The U.S. spends more on defense than the next 10 highest-spending countries combined. In 2020, America’s $732 billion defense budget topped the $726 billion spent by China, India, Russia, Saudi Arabia, France, Germany, the U.K., Japan, South Korea, and Brazil all put together.

Taxpayers foot the bill

Public money flows to most manufacturing operations in one way or another, often through municipal tax incentives for things like factory relocation. When it comes to defense, however, taxpayer dollars cover the entire cost for everything the contractors do and make, and everything the military buys and leases. Public money is concentrated primarily in eight different MIC categories, with the most going to armored vehicles, shipbuilding, guided missiles, aircraft, and ammunition.

The economy needs weapons manufacturing

Contract-based military production now accounts for about 10% of all American manufacturing output. Weapons manufacturing is now responsible for so many of the sector’s remaining jobs, that the U.S. almost has to keep producing weapons whether it needs them or not.

The big defense companies are massive

Thirteen of America’s two dozen biggest defense contractors are listed on the Fortune 500, which ranks the biggest United States corporations in terms of revenue. The MIC’s five biggest players are household names.

Lockheed Martin focuses on aerospace and global security

Founded in 1912, Lockheed Martin operates through four main business segments: Rotary and Missions Systems, Space, Missiles and Fire Control, and Aeronautics. Headquartered in Bethesda, Maryland, it employs 110,000 people and does $64.24 billion in revenue.

Raytheon Technologies was born from a megamerger

In 2020, the Raytheon Company merged with United Technologies Corporation to form Raytheon Technologies. It’s a defense giant that its detractors say now represents a complete monopoly on many key technologies that are used in virtually all military aircraft. It does $83.56 billion in revenue and employs 243,200 people.

Boeing found fame in the sky

Although it also makes commercial airplanes, Boeing produces aircraft—as well as defense, space, and security systems—for the U.S. military. Its most iconic aircraft have legendary alpha-numeric titles like B-52, B-17, and B-29. It employs 161,100 people and does $60.77 billion in revenue.

You may also like: A history of US military aircraft from WWI to today

General Dynamics is one of the oldest

The history of General Dynamics dates all the way back to 1899, and today, it has 102,900 employees and does $38.22 billion in revenue. It makes all kinds of weapons and systems, including fighter planes, warships, submarines, missiles, rockets, and tanks.

Northrop Grumman is like a Walmart of war

With 90,000 employees and $35.31 billion in revenue, Northrop Grumman rounds out the list of the MIC’s five top contractors. Founded in 1939, it produces a huge variety of military weapons, hardware, vehicles, and systems in the realms of surveillance and reconnaissance, computers, and communications, as well as autonomous systems.

Their products come with serious sticker shock

The 2019 federal budget allocated $3.9 billion for General Dynamics’ Ohio-class ballistic missile submarine, $2.3 billion for Northrop Grumman’s B-21 nuclear bomber, $10.6 billion for Lockheed Martin’s F-35 aircraft, and $2.4 billion for Boeing’s F-18 “Super Hornet.” Another $12 billion went to missile-defense systems designed and produced by several top contractors.

Their top brass earn a pretty penny

In 2016, the CEOs at the head of the MIC’s top five contractors earned a combined $96 million—and that’s while they were working. When Boeing’s CEO was recently ousted, he walked away with a compensation package worth more than $60 million.

Their lobbyists wield enormous power

The defense industry doesn’t spend nearly as much on lobbying as other influential interests, but it’s represented by one of the most powerful lobbies in Washington thanks to the revolving door between contractors, Congress, and the Pentagon. Lockheed Martin, Northrop Grumman, and Raytheon Technologies spent the most on lobbying in 2020, funneling millions of dollars to members of Congress. Hundreds of senior government officials are hired by defense contractors in senior positions or as lobbyists every year, perpetuating the revolving door and ensuring defense funding remains a priority.

There are hundreds of MIC lobbyists

There are nearly 650 defense industry lobbyists in Washington representing nearly 200 clients. In 2019, they spent nearly $113 million, the vast majority of which was in pursuit of two things: more defense spending and more government contracts for private defense companies.

MIC lobbyists spend money to influence elections

The defense sector contributed about $200 million to electioneering in the United States between 1990–2010, both through campaign contributions and involvement in political action committees. Overall, much more has gone to Republicans than Democrats.

MIC lobbyists give big money to Congress

In 2020, the defense industry gave more than $27.38 million to support Congressional candidates. Those contributions were split almost right down the middle between Democrats and Republicans.

Industry executives double as policymakers

Top defense industry executives and lobbyists routinely land important government posts in positions where they have direct influence over military contracts and spending policies. Defense Secretary Mark Esper, for example, was the vice president of government relations for Raytheon and former Defense Secretary Patrick Shanahan was a Boeing lobbyist for decades.

It goes both ways

On the flip side, lawmakers and government officials who are friendly to the military-industrial complex often find lucrative jobs waiting for them as defense industry executives and lobbyists when they’re finished with public service. Their enviable salaries are paid for with profits from government contracts and therefore taxpayer dollars.

They have every incentive to play ball

Contracts with these kinds of top-level insiders are often structured in a way that incentivizes them to serve the industry’s interests once they land a high government position. For example, Defense Secretary Esper’s contract with Raytheon, according to Washington Square News, comes with at least $1 million in deferred compensation that’s contingent on the company’s continued financial success. Since his position can directly influence that success, the arrangement puts him at odds with the public he’s sworn to serve and the defense contractors who pay him to steer public money their way.

Competition was removed from contracting

The decade after 9/11 saw no-bid military contracts triple as casualties piled up on foreign battlefields and the Pentagon rushed to find solutions. Competition—bidding, in the case of contract employment—is the capitalistic remedy for shoddy work and inflated prices. When contracts were awarded without the winner having to compete against other bidders who might have offered better proposals, the results were predictable.

The ‘blank check’ system prevailed

While the Pentagon began selecting individual contractors instead of calling on competitors to submit bids, the scope of private contract work had become too big for real oversight to be feasible. In what came to be known as the “blank check” system, it became standard for contractors to continue getting paid no matter the results—even if there were no results at all.

Overcharging became the standard

In 2019, a Congressional oversight committee found that a defense contractor called Transdigm overcharged the Pentagon by 4,451% for purchased parts. Although it hadn’t broken any laws or even any Department of Defense policies, Transdigm was ordered to pay restitution—but the truth is that Transdigm was singled out and scapegoated for doing something that had become the industry-wide standard. Since 9/11, defense contractors have exploited Congress’ terrible spending and oversight failings to engage in systematic price-gouging of the U.S. government and the American taxpayer.

Price-gouging was built into the system by design

In the 21st century, defense industry lobbyists succeeded in pushing legislation through Congress that changed the governmental definition of “commercial” trade as it applies to pricing laws. The new rules exempted military contractors from longstanding price-transparency regulations designed to protect the American public when buying things at market value. The industry successfully argued that it was not selling goods to the American public even though it was being paid with public money.

The inevitable result was rampant fraud

As defense contractors took over government agencies tasked with supervising defense contractors, the inevitable occurred: fraud on a massive scale. In just five years between 2013–17 alone, the Department of Defense held 15 million contracts worth more than $334 billion “with contractors who had been indicted, fined, and/or convicted of fraud, or who reached settlement agreements,” according to the Federation of American Scientists. During that same time, 1,087 defendants, including 409 companies, were convicted across 1,059 cases of defense contracting fraud.

Waste, too, is built into the system

All federal agencies operate on a “use-it-or-lose-it” budget framework that sends them scrambling to spend whatever’s left in their annual budgets at the end of each fiscal year. Since any agency with more money than it can spend will likely be appropriated less money the following year, it becomes a sort of “Brewster’s Millions” effort to offload cash to any contractor with something to sell. In a rush to jettison burdensome taxpayer dollars, the Pentagon in 2018 spent $2.3 million on crabs, another $2.3 million on lobster tails, and $9,341 on a single leather chair.

The MIC ‘shadow government’ has left the shadows

Most MIC conspiracy theories revolve around a secret shadow government populated by powerful private defense contractors that use their influence for the benefit of corporate arms dealers. That’s all true, but there’s nothing secret or shadowy about it.

It certainly didn’t start with him, but President Donald Trump has raised the stakes in saturating the highest levels of the Pentagon and DHS with former defense contractors and lobbyists, including: Secretary for Legislative Affairs Benjamin Cassidy (Boeing) and his assistant Jonathan Rath Hoffman (Chertoff Group); Acting Secretary of Defense Patrick Shanahan (Boeing); Secretary of Defense Mark Esper (Raytheon); National Security Adviser Charlie Kupperman (Boeing and Lockheed Martin); Defense Secretary James Mattis (General Dynamics); Secretary of Homeland Security John Kelly (DynCorp); Deputy Secretary of Homeland Security Elaine Duke (Booz Allen Hamilton, General Dynamics, the Columbia Group); head of the Air Force Heather Wilson (Lockheed Martin); Security Council Chief of Staff retired Lt. Gen. Keith Kellogg (Oracle, Cubic Defense, CACI International)—and the list goes on and on.

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