Within the vast bureaucratic sprawl of the Pentagon there is a group in
charge of monitoring the general state of the military-industrial complex and
its continued ability to fulfill the requirements of the national defense
strategy. Office for acquisition and sustainment and office for industrial
policy spends some $100,000 a year producing an Annual Report to
Congress. It is available to the general public. It
is even available to the general public in Russia, and Russian experts had a
really good time poring over it.
In fact, it filled them with
optimism. You see, Russia wants peace but the US seems to want war and keeps
making threatening gestures against a longish list of countries that refuse to
do its bidding or simply don’t share its “universal values.” But now it turns
out that threats (and the increasingly toothless economic sanctions) are pretty
much all that the US is still capable of dishing out—this in spite of
absolutely astronomical levels of defense spending. Let’s see what the US
military-industrial complex looks like through a Russian lens.
It is important to note that the report’s authors were not aiming to force legislators to finance some specific project. This makes it more valuable than numerous other sources, whose authors’ main objective was to belly up to the federal feeding trough, and which therefore tend to be light on facts and heavy on hype. No doubt, politics still played a part in how various details are portrayed, but there seems to be a limit to the number of problems its authors can airbrush out of the picture and still do a reasonable job in analyzing the situation and in formulating their recommendations.
It is important to note that the report’s authors were not aiming to force legislators to finance some specific project. This makes it more valuable than numerous other sources, whose authors’ main objective was to belly up to the federal feeding trough, and which therefore tend to be light on facts and heavy on hype. No doubt, politics still played a part in how various details are portrayed, but there seems to be a limit to the number of problems its authors can airbrush out of the picture and still do a reasonable job in analyzing the situation and in formulating their recommendations.
What knocked Russian analysis over with a feather is the fact that
these INDPOL experts (who, like the rest of the US DOD, love acronyms) evaluate
the US military-industrial complex from a… market-based perspective! You see,
the Russian military-industrial complex is fully owned by the Russian
government and works exclusively in its interests; anything else would be
considered treason. But the US military-industrial complex is evaluated based
on its… profitability! According to INDPOL, it must not only produce products for the
military but also acquire market share in the global weapons trade and, perhaps
most importantly, maximize profitability for private investors. By this
standard, it is doing well: for 2017 the gross margin (EBITDA) for US defense
contractors ranged from 15 to 17%, and some subcontractors—Transdigm, for
example—managed to deliver no less than 42-45%. “Ah!” cry the Russian experts,
“We’ve found the problem! The Americans have legalized war
profiteering!” (This, by the way, is but one of many instances of
something called systemic corruption, which is rife in the US.)
It would
be one thing if each defense contractor simply took its cut off the top, but
instead there is an entire food chain of defense contractors, all of which are
legally required, no less, to maximize profits for their shareholders. More
than 28,000 companies are involved, but the actual first-tier defense
contractors with which the Pentagon places 2/3 of all defense contracts are
just the Big Six: Lockheed Martin, Northrop Grumman, Raytheon, General Dynmics,
BAE Systems and Boeing. All the other companies are organized into a pyramid of
subcontractors with five levels of hierarchy, and at each level they do their
best to milk the tier above them.
The insistence on market-based methods and
the requirement of maximizing profitability turns out to be incompatible with
defense spending on a very basic level: defense spending is
intermittent and cyclical, with long fallow intervals between major orders.
This has forced even the Big Six to make cuts to their defense-directed
departments in favor of expanding civilian production. Also, in spite of the
huge size of the US defense budget, it is of finite size (there being just one
planet to blow up), as is the global weapons market. Since, in a market
economy, every company faces the choice of grow or get bought out, this has
precipitated scores of mergers and acquisitions, resulting in a highly
consolidated marketplace with a few major players in each space.
As a
result, in most spaces, of which the report’s authors discuss 17, including the
Navy, land forces, air force, electronics, nuclear weapons, space technology
and so on, at least a third of the time the Pentagon has a choice of exactly
one contractor for any given contract, causing quality and timeliness to suffer
and driving up prices.
In a
number of cases, in spite of its industrial and financial might, the Pentagon
has encountered insoluble problems. Specifically, it turns out
that the US has only one shipyard left that is capable of building nuclear
aircraft carriers (at all, that is; the USS Gerald Ford is not exactly a
success). That is Northrop Grumman Newport News Shipbuilding in Newport,
Virginia. In theory, it could work on three ships in parallel, but two of the
slips are permanently occupied by existing aircraft carriers that require
maintenance. This is not a unique case: the number of shipyards capable of
building nuclear submarines, destroyers and other types of vessels is also
exactly one. Thus, in case of a protracted conflict with a serious adversary in
which a significant portion of the US Navy has been sunk, ships will be impossible
to replace within any reasonable amount of time.
The
situation is somewhat better with regard to aircraft manufacturing. The plants
that exist can produce 40 planes a month and could produce 130 a month if
pressed. On the other hand, the situation with tanks and artillery is
absolutely dismal. According to this report, the US has completely lost the
competency for building the new generation of tanks. It is no longer even a
question of missing plant and equipment; in the US, a second generation of engineers
who have never designed a tank is currently going into retirement. Their
replacements have no one to learn from and only know about modern tanks from
movies and video games. As far as artillery, there is just one remaining
production line in the US that can produce barrels larger than 40mm; it is
fully booked up and would be unable to ramp up production in case of war. The
contractor is unwilling to expand production without the Pentagon guaranteeing
at least 45% utilization, since that would be unprofitable.
The
situation is similar for the entire list of areas; it is better for dual-use
technologies that can be sourced from civilian companies and significantly
worse for highly specialized ones. Unit cost for every type of military
equipment goes up year after year while the volumes being acquired continuously
trend lower—sometimes all the way to zero. Over the past 15 years the US hasn’t
acquired a single new tank. They keep modernizing the old ones, but at a rate
that’s no higher than 100 a year.
Because
of all these tendencies and trends, the defense industry continues to lose not
only qualified personnel but also the very ability to perform the work. INDPOL
experts estimate that the deficit in machine tools has reached 27%. Over the
past quarter-century the US has stopped manufacturing a wide variety of
manufacturing equipment. Only half of these tools can be imported from allies
or friendly nations; for the rest, there is just one source: China. They
analyzed the supply chains for 600 of the most important types of weapons and
found that a third of them have breaks in them while another third have
completely broken down. In the Pentagon’s five-tier subcontractor pyramid,
component manufacturers are almost always relegated to the bottommost tier, and
the notices they issue when they terminate production or shut down completely
tend to drown in the Pentagon’s bureaucratic swamp.
The
end result of all this is that theoretically the Pentagon is still capable of
doing small production runs of weapons to compensate for ongoing losses in
localized, low-intensity conflicts during a general time of peace, but even
today this is at the extreme end of its capabilities. In case of a serious
conflict with any well-armed nation, all it will be able to rely on is the existing
stockpile of ordnance and spare parts, which will be quickly depleted.
A
similar situation prevails in the area of rare earth elements and other
materials for producing electronics. At the moment, the accumulated stockpile
of these supplies needed for producing missiles and space technology—most
importantly, satellites—is sufficient for five years at the current rate of
use.
The report specifically calls out the dire
situation in the area of strategic nuclear weapons. Almost all the technology
for communications, targeting, trajectory calculations and arming of the ICBM
warheads was developed in the 1960s and 70s. To this day, data is loaded from
5-inch floppy diskettes, which were last mass-produced 15 years ago. There are
no replacements for them and the people who designed them are busy pushing up
daisies. The choice is between buying tiny production runs of all the consumables
at an extravagant expense and developing from scratch the entire land-based
strategic triad component at the cost of three annual Pentagon budgets.
There
are lots of specific problems in each area described in the report, but the
main one is loss of competence among technical and engineering staff caused by
a low level of orders for replacements or for new product development. The
situation is such that promising new theoretical developments coming out of
research centers such as DARPA cannot be realized given the present set of
technical competencies. For a number of key specializations there are fewer
than three dozen trained, experienced specialists.
This situation is expected to continue to
deteriorate, with the number of personnel employed in the defense sector
declining 11-16% over the next decade, mainly due to a shortage of
young candidates qualified to replace those who are retiring. A specific
example: development work on the F-35 is nearing completion and there won’t be
a need to develop a new jet fighter until 2035-2040; in the meantime, the
personnel who were involved in its development will be idled and their level of
competence will deteriorate.
Although
at the moment the US still leads the world in defense spending ($610 billion of
$1.7 trillion in 2017, which is roughly 36% of all the military spending on the
planet) the US economy is no longer able to support the entire technology
pyramid even in a time of relative peace and prosperity. On paper the US still
looks like a leader in military technology, but the foundations of its military
supremacy have eroded. Results of this are plainly visible:
• The
US threatened North Korea with military action but was then forced to back off
because it has no ability to fight a war against it.
• The
US threatened Iran with military action but was then forced to back off because
it has no ability to fight a war against it.
• The
US lost the war in Afghanistan to the Taliban, and once the longest military
conflict in US history is finally over the political situation there will
return to status quo ante with the Taliban in charge and Islamic terrorist
training camps back in operation.
• US
proxies (Saudi Arabia, mostly) fighting in Yemen have produced a humanitarian
disaster but have been unable to prevail militarily.
• US
actions in Syria have led to a consolidation of power and territory by the
Syrian government and newly dominant regional position for Russia, Iran and
Turkey.
• The
second-largest NATO power Turkey has purchased Russian S-400 air defense systems.
The US alternative is the Patriot system, which is twice as expensive and
doesn’t really work.
All of this points to the fact that the
US is no longer much a military power at all. This is good news for at least
the following four reasons.
First,
the US is by far the most belligerent country on Earth, having invaded scores
of nations and continuing to occupy many of them. The fact that it can’t fight
any more means that opportunities for peace are bound to increase.
Second, once the news sinks
in that the Pentagon is nothing more than a flush toilet for public funds its
funding will be cut off and the population of the US might see the money that
is currently fattening up war profiteers being spent on some roads and bridges,
although it’s looking far more likely that it will all go into paying interest
expense on federal debt (while supplies last).
Third,
US politicians will lose the ability to keep the populace in a state of
permanent anxiety about “national security.” In fact, the US has “natural
security”—two oceans—and doesn’t need much national defense at all (provided it
keeps to itself and doesn’t try to make trouble for others). The Canadians
aren’t going to invade, and while the southern border does need some guarding,
that can be taken care of at the state/county level by some good ol’ boys using
weapons and ammo they already happen to have on hand. Once this $1.7 trillion
“national defense” monkey is off their backs, ordinary American citizens will
be able to work less, play more and feel less aggressive, anxious, depressed
and paranoid.
Last but not least, it will be
wonderful to see the war profiteers reduced to scraping under sofa cushions for
loose change. All that the US military has been able to produce for a long time
now is misery, the technical term for which is “humanitarian disaster.” Look at
the aftermath of US military involvement in Serbia/Kosovo, Afghanistan, Iraq,
Libya, Syria and Yemen, and what do you see? You see misery—both for the locals
and for US citizens who lost their family members, had their limbs blown off,
or are now suffering from PTSD or brain injury. It would be only fair if that
misery were to circle back to those who had profited from it.
Reprinted with permission
from Dmitry
Orlov.
Dmitry
Orlov is a Russian-American engineer and a writer on subjects related to "potential
economic, ecological and political decline and collapse in the United
States," something he has called “permanent crisis”. Orlov believes
collapse will be the result of huge military budgets, government deficits, an
unresponsive political system and declining oil production.
Copyright © 2019 Dmitry Orlov
