Why Dick Cheney is not the only war profiteer

By Colin Motley

The accusations began almost as soon as the “Mission Accomplished” banner was lifted above the deck of the USS Abraham Lincoln and persist almost four years later: the United States intervened in Iraq not to protect against attacks by Saddam Hussein, but rather to line the pockets of Halliburton and other contractors.

Such allegations are hardly a new phenomenon. During his 1961 farewell address, President Dwight D. Eisenhower warned against the potential of malicious interests exploiting the relationship between the military and government for the purposes of profiteering, dubbing such a condition the “military-industrial complex.” Accusations of improper partnerships with the military have dogged nearly every presidential administration since Eisenhower’s address. However, a contemporary paradigm of military spending is emerging to replace Ike’s suspicious model. While his message of vigilance against improper uses of the military still ring true, there is more to the story: in an era of proliferating stock ownership, the American public at large stands to benefit just as much from ramping up military spending as any sinister government agent.

Private to Public

To gauge how much the industry side of the military-industrial complex has changed, one need not look any further than Lockheed Martin, the world’s largest defense contractor. Originally the privately-owned Lockheed Corporation, it was plagued throughout the 20th century by allegations of bribery in securing contracts, and of concealing quality-control issues. In a dramatic about-face, today’s Lockheed has replaced obfuscation with an entirely public approach. Visit their website and see “Investor Relations” displayed as visibly as their product page, and read their annual review targeted directly at members of the public rather than government bid assessors. Investors appreciate the attention: most analysts label Lockheed with coveted “blue-chip” status, and its stock price has increased tenfold since the mid-1970s. It’s not only shareholders that are benefiting – Lockheed employs some 100,000 employees in the United States alone.

And Lockheed is not the only one: the combination of a large employee base and increasingly vital Wall Street operations gives a clear picture of the new direction of the defense industry. In order to stay competitive, contractors have been forced, for better or worse, to seek public financing in the stock market, and to develop a positive image in the eyes of the public through efforts at full disclosure.

Not just Dick Cheney’s Decision

Of course, all of that is not to say that Lockheed’s operations are independent from the U.S. government and the worries of the military-industrial complex. Lockheed’s annual report reveals that some 95% of its revenues still come from the U.S. government, and most directly from the Department of Defense. There is little doubt that Lockheed enjoys favorite-son status from the federal government when it comes to defense spending.

However, rather than ulterior motives of greedy politicians, there seems to be another reason why the government rewards established players like Lockheed with its coveted contracts. In an interview with the HPR, Brookings Institute Fellow Michael O’Hanlon pointed out that “the core issue is the quality of the end product: the most important factor in a decision by the Department of Defense is the level of technology in the bid.” Thus, defense industry veterans like Lockheed have a clear advantage over potential challengers, since O’Hanlon believes “the budgeted costs are often less important than the quality of the proposal.”

A Roundabout Refund

The increasing public integration of defense contractors combined with a tendency towards these established contractors by the federal government, in effect, implies an increase in the scope of the benefits of warfare: when Lockheed and other favored defense contractors do well, increasingly, so does the public. O’Hanlon points out that this is not necessarily a function of government spending on defense, which he remarks “has not changed a whole lot since the early 1990s, but rather there’s been a change in the technology demanded to fight wars.” The American military has become increasingly reliant on technology and therefore continually dependent on the products of firms like Lockheed. The constant development of new methods of protection against Improvised Explosive Devices (IEDs) in Iraq is a perfect example of the breakneck speed of military technology development, a pace that is very much to Lockheed’s liking.

Indeed, there is no better example of the changing nature of the military-industrial complex than the war in Iraq. Lockheed’s share price was hit hard in the recession of the early 21st century like much of the rest of the stock market, but unlike its blue-chip companions, Lockheed saw a noticeable spike in price in the summer of 2002, right as the escalation of warnings of war with Iraq began. What this implies is that the public could have benefited financially as much as any administration official from the economic stimulus provided by war: as stock prices increased, so did the value of the company to its shareholders and employees. Thanks to the march toward public ownership, if the Department of Defense continues to look favorably on Lockheed, ordinary members of the public, stockholders, and the 100,000 employees at Lockheed, will continue to benefit.

The military-industrial complex may certainly still exist. As Ike said, we ought to be wary of the possibility of a corrupt government waging wars simply for personal economic gain. However, before blaming war on the stuffed pockets of government officials, perhaps we ought to check our own pockets first.