Hello all. Today I'd like to talk about military money, and how powerful it is. Military money,
or defense contracting is one of the most powerful elements in government. But I would
argue that we don't quite realize the full picture. Today I'd like to lay that out.
Now we've already covered elsewhere how defense contracting works. A company has a large massive
project of some sort that they want to implement, so they make sure to divide the project up
between as many jurisdictions as possible. That way, they make the program immortal.
If you've got a piece in every state in the United States, that program is never going
to die, because the Senators and congresspeople from those states will make sure that it lasts
forever. That's how we end up with a Trillion dollar program for a fighter jet that doesn't
fight things very well.
But to see the true dimensions of the power of military money, we're going to have to
step back and take a look at the broader economy. And the very powerful and unique role that
defense spending has within that economy.
It may not seem that way but 21st century capitalism has a lot of rules. We have things
like the World Trade Organization, and a whole bunch of other multi-lateral or just bi-lateral
treaties and organizations that limit the ways that government can help business. At
least in principle there's an even playing field between companies from different countries.
The world trade organization even has a system of tribunals that enforce this sort of thing.
Now in practice this of course does not work perfectly. Every developed country, and now
more and more developing countries have all kinds of systems and strategies that they
use to work around this. There are all kinds of tax incentives and subsidies and... well
basically they're always coming up with new ways to try and get around these things. And
don't even get me started about the way that in the United States you've got like 80% of
the people running big companies and running the government who all went to the same four
or five schools. But no matter how imperfectly all of this works, the principles are there,
the rules are there and they have to be followed, or at least they have to appear to be followed.
This is not the way it works for defense spending, And I'm not arguing that it should! It makes
sense that there are carve-outs in all of these regulations and organizations that state,
specifically that none of these rules apply to defense industries. If it comes down to
the defense of a country then that country needs to do what it feels that it needs to
do to defend itself. That makes sense.
But we need to recognize the privileged position that this puts defense contractors in. We
need to recognize how powerful this makes military money. There are a whole range of
international organizations that govern military technology. But what these international organizations
do is actually the opposite of what the World Trade Organization does. The World Trade Organization
tries to make trade freer, tries to make the playing field more even for businesses generally.
What the organizations that deal with the arms industry do, on the international level,
and on the local level... on the local of individual national governments, what they
do, is they make trade less free. This makes it harder for new companies that want to implement
defense technologies, but it makes things much, much easier for the established players.
On the international level there's this thing called the Wassenaar Arrangement. It's not
an agreement, it's an arrangement. All of the companies with large military manufacturing
industries are members of this arrangement. They report all of their sales to this organization.
Everything from bullets to missile technology is reported and discussed and dealt with to
some degree.
Now of course, there are illegal arms dealers, but it's much harder to access these channels
of sales if you want to be an above board defense contractor.
From here on in, I'm mostly going to talk about the United States, but I want to emphasize
that this is not just a US problem. France, the United Kingdom, Russia, China, and a whole
bunch of other countries have massive defense industries, and they have similar set-ups...
within their government. They have similar shady arrangements between defense contractors
and legislators. It's a problem across the world. Of course, the United States has the
biggest military, so we have the biggest problem.
So, drilling down to the United States, there's a massive Export Control Regime. There are
multiple government agencies that are party to this scheme, to this export control. The
State Department does some stuff. The Defense Department does some stuff. There's a lot
going on. There's this incredible thicket of regulations, that govern who you can sell
to, why you can sell to.
All of this doesn't actually slow things down. It just makes the relationship tighter. If
the government wants to sell 15 Billion dollars worth of fighter jets to Saudi Arabia, it's
going to happen. But all of these export controls add complexity, and that makes the big defense
contractors much, much safer. If you want to sell a new tank, it's not like you can
just build a new tank. You need teams of lawyers, you need teams of bureaucrats, you need teams
of executives that can interact with the government. This is of course a pain, but it makes the
big companies much, much safer. And once again, there absolutely should be an export control
regime when it comes to military systems.
But in the United States at least, it goes much, much further than that. The United States
operates a foreign military sales program. This means that the Department of Defense
isn't just subsidizing military contractors, isn't just buying their stuff... the Department
of Defense actually acts as a sales department for military contractors. US government personnel
end up actively selling these weapons systems to other countries, US military personnel
end up delivering these systems, and in a lot of cases they end up training foreign
militaries on the use of these weapons systems. For some of this, I'm sure there's a very
legitimate national security interest, but we're talking about billions and billions
of dollars a year. This is a program that very few people even know anything about.
This is pretty extraordinary. In most industries, if a government wants to support that industry
they have to be kind of sneaky. They've gotta come up with some kind of justification, they've
gotta fiddle with the tax code or something like that. In the defense industry, the government
is actively selling the products of the industry. It doesn't even really make sense to call
this capitalism. It's actually socialism pure and simple.
So think about what this means for a second. Say you're a US congressperson from Kentucky,
or a French member of Parliament from a region, or whatever it is they have. Who are you going
to be more interested in talking to? Are you going to be interested in talking to, and
doing things for a Bathtub company? That has a bathtub factory that they'd like to put
in your region? I mean sure, you want them to put that bathtub factory in your region,
but no matter how many tax subsidies or incentives you give to that bathtub factory, if somebody,
say, China, figures out how to make a cheaper bathtub, it doesn't matter. That factory's
going to disappear.
On the other hand, you could form a relationship with a defense contractor. This defense contractor
is going to have government on its side, and on your side through every step of the interaction.
Government will help put the factory in. Government will help sell the things that that factory
makes, and there's no question of foreign competition when it comes to weapons systems.
I should have made this clear earlier but I think it's just common sense that a government
isn't going to want to buy weapons from another country or components of complex technological
weapons systems from other countries unless it has to. A lot of that is written into law
in the United States.
So if you're a congressperson who has a relationship with a defense contractor, they're going to
be your friend forever. They're not going to go anywhere, the government says so. And
if it looks like that's going to change? You're a congressperson, you can make sure it doesn't.
And that's why military money is so much more powerful than any other kind of money in the
broader economy. The defense industry, the military industrial complex, isn't just one
of our country's biggest industries, it's also, certainly, our country's most protected
industry. In fact, it's probably one of the most effective jobs programs that the United
States government runs. If we want to talk seriously about the US government and US military's
role in the world or it's role in US politics, we have to look at these facts honestly.
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