Something Is Rotten in the State of the Military-Industrial Complex*

*Editor’s Note: On March 4, Russia enacted a law that criminalizes public opposition to, or independent news reporting about, the war in Ukraine. The law makes it a crime to call the war a “war” rather than a “special military operation” on social media or in a news article or broadcast. The law is understood to penalize any language that “discredits” Russia’s use of its military in Ukraine, calls for sanctions or protests Russia’s invasion of Ukraine. It punishes anyone found to spread “false information” about the invasion with up to 15 years in prison.

Egor Spirin, an expert at the Institute of International Studies, Moscow State Institute of International Relations, on the industrial problems facing the U.S. military-industrial complex.

U.S. arms manufacturers are concerned with two problems: The difficulty in restarting production lines and the limited stock of materials for manufacturing portable anti-aircraft systems known as Stingers. These concerns largely reflect the serious industrial base issues facing the U.S. defense industry.

For the past several months, the U.S. and its allies have been stepping up arms shipments to Ukraine. From the commercial point of view of the U.S. weapons manufacturers, prolonging the conflict by supplying such material looks like an extremely attractive enterprise. The U.S. shipped more than 1,400 Stingers and 5,500 Javelins by mid-April primarily from contractors such as Raytheon Technologies Co., and Lockheed Martin. Equally important revenue streams are coming from government programs such as the United States Army intelligence and foreign military funding. Among other programs, these are aimed at financing the purchase of U.S. weapons and an overall increase in defense spending (including in Europe). Appropriation is also a significant factor. According to American experts, “more than half of the Pentagon’s $6.5 billion portion of the emergency-spending package for Ukraine is designated simply to replenish DoD inventories.”

At first glance, the situation appears to be a win-win for U.S. defense contractors, which benefit from arms deliveries and investment to replenish supplies. But, to paraphrase William Shakespeare, something is rotten in the state of the military-industrial complex. During a Senate Armed Services Committee hearing, former Pentagon Undersecretary for Acquisition and Sustainment Ellen Lord noted that the U.S. has transferred “a quarter of our stocks of Stinger missiles” and “we cannot, within the next couple of years, produce more, because we have a problem with the government not paying to maintain production capacity.” Long interruptions and extremely low production rates, she said, lead to failures in inspecting equipment, which in turn leads to breakdowns and obsolescence, as well as disruptions in supply chains.

David Berteau, a former Pentagon official who oversaw logistics and materiel for the U.S and now CEO of the Professional Services Council — the trade association for government technology companies — notes that “we have yet to see a single contract in place to start on the replenishment. Discussions are going on, but there’s no definition of what the requirement is, yet, because we still don’t know how much we’re going to draw down” for Ukraine. Replenishing the stockpiles requires industrial capacity, which must be conducted in close cooperation with the Pentagon. In practice, this should take the form of an industrial policy focused on investment in infrastructure, a lack of which, according to Lord, has created the situation in which the U.S. defense industry now finds itself.

According to the American Society of Civil Engineers, which issues regular report cards on the state of U.S. infrastructure, the country faces a $2.6 trillion infrastructure investment gap. This gap certainly does not exclude the defense industry and will lead to an estimated $10 trillion loss in gross domestic product by 2039 if left unaddressed.

This circumstance is exacerbated by several other general problems facing the U.S. military-industrial complex. The supply chain problem, which went mainstream amid the COVID-19 pandemic, has also affected the defense industry. In 2018, the Pentagon published a report that pointed to the “fragility” of the U.S. military’s supply chain capability. Experts subsequently noted that “many production facilities are owned by companies that are financially vulnerable and at high risk of being shut down. Some of the risk comes from limited production capability. Mortar tubes, for example, are made on just one production line, and some Marine aircraft parts are made by just one company — one which recently filed for bankruptcy.”

In a U.S. Defense Department report in February, the authors noted that “the risks of disruption have grown in tandem with the increasing complexity of U.S. defense supply chains. The average American aerospace company relies on roughly 200 first tier suppliers. Second and third tier suppliers have more than 12,000 companies. With the globalization of supply chains, these suppliers and their goods come from a wide array of places. Some foundational industrial supply chain sectors, like optical instruments, mechanical gears, welding equipment and printed circuit boards source a large part of their components from outside North America.”

Among the factors contributing to the fragility of the market for strategically important materials are the concentration of supply, single-source suppliers, price shocks and human capital gaps. There is also a dependence on supplies from countries that the U.S. considers its adversaries. For example, the previously mentioned 2018 report noted that “China is also the sole source or a primary supplier for a number of critical energetic materials used in munitions and missiles.” By the way, Russia also has some leverage in this regard. Ironically, the Americans themselves have caused the use of this leverage through its sanctions policy. Thus, according to Raytheon CEO Greg Hayes, in connection with the anti-Russian sanctions and terminating relationships with suppliers from Russia, “the company is looking for new sources of titanium sponge, castings and forgings.”

Again, this situation points to the truism that the party that imposes sanctions suffers from this emotionally driven policy. To summarize the analysis of the supply chain issue, in many ways, Donald Trump’s 2016 rhetoricabout the offshoring of production and industrial decline did not ring hollow. The problems that the 45th president outlined are reflected in an industry as significant as defense.

Seen in the supply chain context, the problem of supply concentration is also somewhat self-inflicted. For example, the Pentagon’s Industrial Capabilities Report estimates that “one change that did take place was the drastic consolidation of the largest defense contractors from fifteen to five, which, among other things, reduced competition for contracts, formerly a key driver behind controlling costs and spurring innovation.” This situation is clearly evident in the aerospace industry, for example.

American analysts point out the disproportion between costs and results, expressed both quantitatively (the number of military ships and aircraft in service is decreasing) and qualitatively. The quality issues stand out, including problems with the F-35 and Littoral Combat Ship models. Kelley B. Vlahos, a senior adviser at the Quincy Institute, summed up the imbalance problem when he argued that “instead of pouring resources and energy into maintaining readiness, much of Washington’s zeal today is about throwing money at shiny new objects: Big-ticket weapons systems, ships, and aircraft that either take years to build, become obsolete, or don’t work.”

It’s hard to describe the current state of the U.S. defense industry as flawless, mainly due to a general systemic design aimed at rent-seeking behavior. The U.S. defense industry is a complex and powerful machine, not a paper tiger. Nevertheless, this machine, too, is not devoid of problems, which have become especially apparent against the background of the ongoing arms deliveries to Ukraine.

The author is an expert at the Institute of International Studies, Moscow State Institute of International Relations. The author’s opinion may not reflect the views of Izvestia’s editorial board.