Last week Politico reporters Leigh Munsil and Austin Wright reported on Lockheed Martin’s recent purchase of Sikorsky Aircraft—the helicopter division of United Technologies. The report cited concerns from several defense experts that the $9 billion sale would deeply embed Lockheed in the politics of New England—a region where it previously had a limited presence. The involvement of Lockheed in the politics of the region, and specifically those of Sikorsky’s home state of Connecticut, would in turn further distort budgetary priorities in the direction of the world’s largest defense company.
Concerns about whether Lockheed is too politically powerful are legitimate, but they also may be a case of a horse who has long ago left the barn. Lockheed Martin was too big to fail before it bought Sikorsky.
While the modern defense industry might maintain a patina of capitalist characteristics, it is anything but. The defense industry is at best a monopsony, but its relationship with the government is more symbiotic. The government is the industry’s only customer, so the latter has a great deal of interest in serving the former. That customer service comes in the form of not only responsiveness to military wants and desires, but also of acting as an advocate for those wants and desires with regard to Congress. The public arsenal system that existed before World War II had organizational interests of its own that often disconnected it from serving military interests. The organizational interest of defense companies like Lockheed is profit; so being an advocate for the military’s organizational interests serves that end. Legislators, who fund the military’s projects and thus secure the defense industry’s profits, are happy to play along if it means jobs for home states and districts.
None of this is a big secret, but changes in the defense industry in the aftermath of the Cold War—or, rather, the lack thereof—are illustrative of why Lockheed was already too big to fail. Two factors should have led to a restructuring of the defense industry in the 1990s: falling defense spending and the so-called “Revolution in Military Affairs.” The first meant that fewer programs would start and fewer platforms would be purchased. The latter, by exploiting a wave of maturing information technologies (IT), was supposed to result in a less expensive force structure that was smaller and more networked.
While there were certainly fewer programs started and platforms purchased in the years following the Cold War, neither the structure of the defense industry nor the military’s force structure changed significantly. As scholars Harvey Sapolsky and Eugene Gholz have shown, the relatively gradual post-Cold War defense drawdown allowed the defense industry to maintain the production capacity brought about by the Reagan defense build-up of the previous decade. While mergers and acquisitions of defense companies occurred—such as when Lockheed acquired Martin Marietta, its biggest purchase before Sikorsky—this excess capacity was not consolidated. Those companies, familiar with the political terrain, could therefore continue to serve as advocates for the military services. As Gholz argued separately, despite the IT revolution, these industries continued to pursue their core industrial competencies—subcontracting out work for new sensors and precision technologies that were then incorporated into existing platforms. The military services once again benefitted from this arrangement because maintaining those platforms helped the services maintain, as Gholz put it, their “organizational essence.” Congress, of course, had no problem with the deal because the maintenance of production capacity, even at lower production levels, kept jobs in districts.
This symbiotic relationship was not going anywhere even if Lockheed did not acquire Sikorsky, nor were those with Raytheon, Northrop Grumman, Boeing, and General Dynamics. The question is whether there is a way to address it now. One suggestion involves a familiar process: BRAC. The Base Realignment and Closure process was designed as an apolitical means to get rid of excess military base capacity. A similar process could be used to do away with excess production capacity. Unfortunately, Congress is even less likely to pursue such a course with regards to industry than it is with military bases. The Pentagon has requested a BRAC for several years now, and legislators have rejected it each time. But even if capacity is diminished, companies like Lockheed are not likely to go anywhere anytime soon. Coming to terms with that will help guide the path forward.