Springtime for the Military-Industrial Complex

The FT erroneously concludes that the boom-times are over for the military contractors:

The wars in Afghanistan and Iraq have been a boon to US contractors. The US has used so many of them in the conflicts that at times they outnumbered the military they supported. But the boom times are coming to an end and military service companies in particular are being squeezed.

Moody’s, the rating agency, expects revenue and margin pressure on defence service companies to become visible soon as the US Department of Defence, the world’s biggest military spender, negotiates tougher terms for contractors, reduces spending on them and brings its troops home from Afghanistan in time to meet the end 2014 deadline set by President Barack Obama.

In Iraq and Afghanistan the top contractor was Kellog, Brown & Root, the engineering and construction services company. It earned $40.8bn during the past decade, while Agility, the logistics company, and DynCorp, which specialises in security, earned $9bn and $7.4bn respectively, according to a US government report.

After a decade of unrivalled prosperity thanks to war and a booming global economy the defence service sector will have to work harder through innovation, as well as lean and well-focused management, to prosper.

In a word, nope. What cuts? The Obama budget aims to increase military expenditures far-above their already-puffed-up status quo:

Offering a military budget designed to head off charges that he’s weak on defense, President Obama unveiled a Pentagon spending plan that fails to cut any major procurement programs and calls for spending $36 billion more on the military in 2017 than it will spend this year.

Here’s what Obama intends to increase (and what Romney, of course, intends to increase more):

Yeah, America is spending more today drone-striking American citizens in Yemen, drone-surveilling Mexican drug lords and “turning our attention to the vast potential of the Asia-Pacific region” than she was during the cold war when a hostile superpower had thousands of nukes pointing at her.

Military contractors have nothing to fear. Whether it is the Pacific buildup to contain Chinese ambition, or drone strikes in the horn of Africa or Pakistan, or the completely-failed drug war, or using the ghost of Kony to establish a toehold in Africa to compete with China for African minerals, or an attempted deposition of Bashar Assad or Egypt’s new Islamist regime, or bombing Iran’s uranium-enrichment facilities, or a conflict over mineral rights in the Arctic, or (as Paul Krugman desires — and what the heck, it’s 2012, why not?) an alien invasion, or a new global conflict arising out of a global economic reset, it’s springtime for the military contractors. It’s everyone else who should be worried.

25 thoughts on “Springtime for the Military-Industrial Complex

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  4. This is why I’m a Libertarian; the current duopoly of democrats & republicans must be replaced to end this boondoogle for the military-industrial complex. Perpetual wars, perpetual taxes, perpetual big Gov’t must GO!

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  7. I have never heard of these companies. Who owns them? Who gets the benefit?

    Speaking from someone who is trying to start a grass roots Libertarian political movement, can only speak from experience when I say one must have an economic backer. Julian Assange’s movement was probably the closest we got to a low cost “Digital Democracy” political party and look where he has ended up.

    Unless you have the backing of powerful interests, your political career is non existent. Defence is an expenditure that never gets public scrutiny. It is the ultimate business to be in. Political capture is easier when the Politician says he is keeping you safe from an “enemy”.

    Big money in war: From Wikipedia http://en.wikipedia.org/wiki/Hiram_Stevens_Maxim

    Maxim was reported to have said: “In 1882 I was in Vienna, where I met an American whom I had known in the States. He said: ‘Hang your chemistry and electricity! If you want to make a pile of money, invent something that will enable these Europeans to cut each others’ throats with greater facility.'”

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  10. South China sea pacific region is a ticking time bomb. The U.S defense industry is working very hard stirring the pot. Lots of profit over there when the surronding small countries are fighting China for the deep sea oil/gas and fishery resources. China already ate up their own fishery resources (partially China’s break neck speed economic growth and enviornmental destruction are to blame.)

    The U.S has the money for defense build up now since people around the world putting their money into the U.S treasuries at almost no interest.

    China of course must increase building their military for the reason they have so much wealth. After all what’s point to be wealthy if one can’t protect what one gets? Military defense spending should be increasing in the same rate as one’s wealth increasing. So China’s increasing in it’s military spend is very reasonable.

    • If I was a Chinese policymaker, I would be looking to contain the US in the Pacific. Having most of the world’s industrial base in your country helps.

      • Not that they haven’t thought about and tried. Problem? China’s Value system and ideology, and it’s political system are the worst corrupted in the world though not alone. The CCP is a mafia gang government not a grain of moral but the decadent, greed pervert in the best highest form. They can’t contain the U.S. Non of China’s neighbor believe in China’s government, not even N. Korea. China even use free trade as the bait and Economic black mail tact too. Non has effective so far.

        The U.S.A’s practicpation in that region in part was asked and begged by the South Pacific small Countries. Or the U.S.A won’t be so welcome over there. Don’t you know?

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