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Fatal Flaws Undermine America’s Defense Industrial Base

Many elements of the traditional DIB have yet to adopt advanced manufacturing technologies, as they struggle to develop business cases for needed capital investment.

In other words, while adopting advanced manufacturing technologies would fulfill the purpose of the US Department of Defense, it is not profitable for private industry to do so.

Despite virtually all the problems the report identifies stemming from private industry’s disproportionate influence over the US DIB, the report never identifies private industry itself as a problem.

If private industry and its prioritization of profits is the central problem inhibiting the DIB from fulfilling its purpose, the obvious solution is nationalizing the DIB by replacing private industry with state-owned enterprises. This allows the government to prioritize purpose over profits. Yet in the United States and across Europe, the so-called “military industrial complex” has grown to such proportions that it is no longer subordinated to the government and national interests, but rather the government and national interests are subordinated to it.

US defense industrial strategy built on a flawed premise

Beyond private industry’s hold on the US DIB, the very premise the NDIS is built on is fundamentally flawed, deeply rooted in private industry’s profit-driven prioritization.

The report claims:

The purpose of this National Defense Industrial Strategy is to drive development of an industrial ecosystem that provides a sustained competitive advantage to the United States over its adversaries.

The notion of the United States perpetually expanding its wealth and power across the globe, unrivaled by its so-called “adversaries” is unrealistic.

China alone has a population 4-5 times greater than the US. China’s population is, in fact, larger than that of the G7 combined. China has a larger industrial base, economy, and education system than the US. China’s education system not only produces millions more graduates each year in essential fields like science, technology, and engineering than the US, the proportion of such graduates is higher in China than in the US.

China alone possesses the means to maintain a competitive advantage over the United States now and well into the foreseeable future. The US, attempting to draw up a strategy to maintain an advantage over China (not to mention over the rest of the world) regardless of these realities, borders on delusion.

Yet for 60 pages, US policymakers attempt to lay out a strategy to do just that.

Not just China, but also Russia

While China is repeatedly mentioned as America’s “pacing challenge,” the ongoing conflict in Ukraine is perhaps the most acute example of a shifting balance of global power.

Despite a combined population, GDP, and military budget many times greater than Russia’s, the collective West is incapable of matching Russian production of even relatively simple munitions like artillery shells, let alone more complex systems like tanks, aircraft, and precision-guided missiles.

While the US and its allies appear to have every conceivable advantage over Russia on paper, the collective West has organized itself as a profit-driven rather than purpose-driven society.

In Russia, the defense industry exists to serve national security. While one might believe this goes without saying, across the collective West, the defense industry, like all other industries in the West, exists solely to maximize profits.

To best serve national security, the defense industry is required to maintain substantial surge capacity – meaning additional, unused factory space, machines, and labor on standby if and when large surges in production are required in relatively short periods of time. Across the West, in order to maximize profits, surge capacity has been ruthlessly slashed, deemed economically inefficient. Only rare exceptions exist, such as US 155 mm artillery shell production.

While the West’s defense industry remains the most profitable on Earth, its ability to actually churn out arms and ammunition in the quantities and quality required for large-scale conflict is clearly compromised by its maximization of profits.

The result is evident today as the West struggles to expand production of arms and ammunition for its Ukrainian proxies.

The NDIS report would note:

Prior to the invasion, weapon procurements for some of the in-demand systems were driven by annual training requirements and ongoing combat operations. This modest demand, along with recent market dynamics, drove companies to divest excess capacity due to cost. This meant that any increased production requirements would require an increase in workforce hours in existing facilities—commonly referred to as “surge” capacity. These, in turn, were limited further by similar down-stream considerations of workforce, facility, and supply chain limitations.

Costs are most certainly a consideration across any defense industry, but costs cannot be the primary consideration.

A central element of Russia’s defense industry is Rostec, a massive state-owned enterprise under which hundreds of companies related to national industrial needs including defense are organized. Rostec is profitable. However, the industrial concerns organized under Rostec serve purposes related to Russia’s national interests first and foremost, be it national health, infrastructure or security.

Because Russia’s defense industry is purpose-driven, it produced military equipment because it was necessary, not because it was profitable. As a result, Russia possessed huge stockpiles of ammunition and equipment ahead of the Special Military Operation (SMO) in February 2022. In addition to this, Russia maintained large amounts of surge capacity enabling production rates of everything from artillery shells to armored vehicles to expand quickly over the past 2 years.

Only relatively recently have Western analysts acknowledged this.

Continue reading →

“military industrial complex” has grown to such proportions that it is no longer subordinated to the government and national interests, but rather the government and national interests are subordinated to it.

the collective West has organized itself as a profit-driven rather than purpose-driven society………………………………across the collective West, the defense industry, like all other industries in the West, exists solely to maximize profits.

By Brian Berletic, Orinoco Tribune. February 24, 2024  https://popularresistance.org/fatal-flaws-undermine-americas-defense-industrial-base/

The first-ever US Department of Defense National Defense Industrial Strategy (NDIS) confirms what many analysts have concluded in regard to the unsustainable nature of Washington’s global-spanning foreign policy objectives and its defense industrial base’s (DIB) inability to achieve them.

The report lays out a multitude of problems plaguing the US DIB including a lack of surge capacity, inadequate workforce, off-shore downstream suppliers, as well as insufficient “demand signals” to motivate private industry partners to produce what’s needed, in the quantities needed, when it is needed.

In fact, the majority of the problems identified by the report involved private industry and its unwillingness to meet national security requirements because they were not profitable.

For example, the report attempts to explain why many companies across the US DIB lack advanced manufacturing capabilities, claiming:

Many elements of the traditional DIB have yet to adopt advanced manufacturing technologies, as they struggle to develop business cases for needed capital investment.

In other words, while adopting advanced manufacturing technologies would fulfill the purpose of the US Department of Defense, it is not profitable for private industry to do so.

Despite virtually all the problems the report identifies stemming from private industry’s disproportionate influence over the US DIB, the report never identifies private industry itself as a problem.

If private industry and its prioritization of profits is the central problem inhibiting the DIB from fulfilling its purpose, the obvious solution is nationalizing the DIB by replacing private industry with state-owned enterprises. This allows the government to prioritize purpose over profits. Yet in the United States and across Europe, the so-called “military industrial complex” has grown to such proportions that it is no longer subordinated to the government and national interests, but rather the government and national interests are subordinated to it.

US defense industrial strategy built on a flawed premise

Beyond private industry’s hold on the US DIB, the very premise the NDIS is built on is fundamentally flawed, deeply rooted in private industry’s profit-driven prioritization.

The report claims:

The purpose of this National Defense Industrial Strategy is to drive development of an industrial ecosystem that provides a sustained competitive advantage to the United States over its adversaries.

The notion of the United States perpetually expanding its wealth and power across the globe, unrivaled by its so-called “adversaries” is unrealistic.

China alone has a population 4-5 times greater than the US. China’s population is, in fact, larger than that of the G7 combined. China has a larger industrial base, economy, and education system than the US. China’s education system not only produces millions more graduates each year in essential fields like science, technology, and engineering than the US, the proportion of such graduates is higher in China than in the US.

China alone possesses the means to maintain a competitive advantage over the United States now and well into the foreseeable future. The US, attempting to draw up a strategy to maintain an advantage over China (not to mention over the rest of the world) regardless of these realities, borders on delusion.

Yet for 60 pages, US policymakers attempt to lay out a strategy to do just that.

Not just China, but also Russia

While China is repeatedly mentioned as America’s “pacing challenge,” the ongoing conflict in Ukraine is perhaps the most acute example of a shifting balance of global power.

Despite a combined population, GDP, and military budget many times greater than Russia’s, the collective West is incapable of matching Russian production of even relatively simple munitions like artillery shells, let alone more complex systems like tanks, aircraft, and precision-guided missiles.

While the US and its allies appear to have every conceivable advantage over Russia on paper, the collective West has organized itself as a profit-driven rather than purpose-driven society.

In Russia, the defense industry exists to serve national security. While one might believe this goes without saying, across the collective West, the defense industry, like all other industries in the West, exists solely to maximize profits.

To best serve national security, the defense industry is required to maintain substantial surge capacity – meaning additional, unused factory space, machines, and labor on standby if and when large surges in production are required in relatively short periods of time. Across the West, in order to maximize profits, surge capacity has been ruthlessly slashed, deemed economically inefficient. Only rare exceptions exist, such as US 155 mm artillery shell production.

While the West’s defense industry remains the most profitable on Earth, its ability to actually churn out arms and ammunition in the quantities and quality required for large-scale conflict is clearly compromised by its maximization of profits.

The result is evident today as the West struggles to expand production of arms and ammunition for its Ukrainian proxies.

The NDIS report would note:

Prior to the invasion, weapon procurements for some of the in-demand systems were driven by annual training requirements and ongoing combat operations. This modest demand, along with recent market dynamics, drove companies to divest excess capacity due to cost. This meant that any increased production requirements would require an increase in workforce hours in existing facilities—commonly referred to as “surge” capacity. These, in turn, were limited further by similar down-stream considerations of workforce, facility, and supply chain limitations.

Costs are most certainly a consideration across any defense industry, but costs cannot be the primary consideration.

A central element of Russia’s defense industry is Rostec, a massive state-owned enterprise under which hundreds of companies related to national industrial needs including defense are organized. Rostec is profitable. However, the industrial concerns organized under Rostec serve purposes related to Russia’s national interests first and foremost, be it national health, infrastructure or security.

Because Russia’s defense industry is purpose-driven, it produced military equipment because it was necessary, not because it was profitable. As a result, Russia possessed huge stockpiles of ammunition and equipment ahead of the Special Military Operation (SMO) in February 2022. In addition to this, Russia maintained large amounts of surge capacity enabling production rates of everything from artillery shells to armored vehicles to expand quickly over the past 2 years.

Only relatively recently have Western analysts acknowledged this.

Continue reading →

February 27, 2024 Posted by Christina Macpherson | business and costs, politics, Reference, USA, weapons and war | Leave a comment