By Dmitry Orlov
July 22, 2019 "Information
Clearing House" -
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.
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.)
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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.
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”
This article was originally published by "Club Orlov" -
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==See Also==
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