Fatal Flaws Undermine America’s 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.

The New York Times in its September 2023 article, “Russia Overcomes Sanctions to Expand Missile Production, Officials Say,” admits Russian arms production of not only missiles, but also armored vehicles and artillery shells have exceeded prewar levels. The article estimates that Russia is producing at least seven times more ammunition than the US and its Western allies combined.

Despite this, Western analysts now claim Russian production will “plateau” as the limits of surge capacity are reached and new facilities and sources of raw materials are required.

The Royal United Services Institute (RUSI) in a February 2024 article titled, “Russian Military Objectives and Capacity in Ukraine Through 2024,” regarding ammunition production would claim:

…the Russian MoD does not believe it can significantly raise production in subsequent years, unless new factories are set up and raw material extraction is invested in with a lead time beyond five years.

But because Russia’s industrial base is purpose-driven rather than profit-driven, additional facilities are already being built despite the longer-term economic inefficiency of doing so.

US government-funded Radio Free Europe/Radio Liberty in a November 2023 article titled, “Satellite Images Suggest Russia Is Ramping Up Production Capacity For Its War Against Ukraine,” reported that Russia was not only expanding production at existing facilities but was also developing new factories producing warplanes, combat helicopters, military drones, and guided munitions.

US “Solutions” Fall Far Short

The 2023 NDIS cites the expansion of 155 mm artillery shell production as a demonstration of the US DIB’s ability to “scale rapidly.”

The report claims:

In response, the DoD has invested in expanding existing production facilities in Scranton, Pennsylvania and broke ground on a new production facility in Mesquite, Texas to respond to the higher demand signal. In addition to these investments made in December 2022, the U.S. Army awarded contracts worth $1.5 billion in September 2023* to meet its goal of delivering more than 80,000 projectiles per month by the end of FY2025.

However, this was only possible because the US Army owns the facilities producing artillery shells. Increased rates of shell production were made possible through existing surge capacity deliberately set up by the US Army years before the Russian SMO began. This foresight in planning, unfortunately for the United States, is a rare exception to the rule and cannot be applied across the rest of US and European arms production.

The West’s profit-driven policies have created problems for the US DIB well downstream of production lines for arms and ammunition. This includes America’s decades of off-shoring production to maximize profits by taking advantage of cheaper labor overseas. Many raw materials and components used across the US DIB today come from overseas including from “adversarial” nations.

The NDIS report lamented:

Over the last decade, the DoD has struggled to curtail adversarial sourcing and burnish the integrity of defense supply chains. Despite these efforts, dependence on adversarial sources of supply has grown. DoD continues to lack a comprehensive effort for mitigating supply chain risk. 

Profit-driven policies have also hurt the workforce. Decades of off-shoring US manufacturing saw America transition to a primarily service-based economy. This was reflected across education as well, where vocational skills were not only neglected, they were stigmatized.

The NDIS report would explain that:

The labor market lacks the required number of skilled workers to meet defense production demand while driving innovation at all levels. This shortfall is becoming exacerbated as baby boomers retire, and younger generations show less interest in manufacturing and engineering careers.

Beyond this problem, profit-driven policies have made education in the United States inaccessible. The desire to profit from providing education has usurped the actual purpose of providing education in the first place – the creation of human resources required to run a functioning, prosperous society. Degrees and training courses in the United States require loans that can take a lifetime to pay off.

A lack of interest in skilled labor and the inaccessibility of education in the United States has resulted in a skewed workforce relative to the rest of the world. The number of STEM (science, technology, engineering, and mathematics) graduates in the US, for example, is comparable to Russia despite Russia having less than half the total population of the US. In 2016 there were 568,000 STEM graduates in the US for Russia’s 561,000, according to Forbes. China produced over 4.7 million graduates that same year.

US economic fundamentals altogether have created a skewed society and correspondingly skewed DIB that is struggling to match that of nations smaller in terms of population and GDP. But even if the US did address these fundamental problems, the fact remains that China alone, saying nothing of the BRIC alliance it is a part of, has both solid fundamentals and simply possesses a larger population, economy, and industrial base.

The premise upon which US foreign policy is based is unrealistic. The fundamentals of US economic power are fatally flawed.

The very notion of the US maintaining a competitive edge over the rest of the world is only realistic if the rest of the world is suffering from significant internal and/or regional instability.

This is precisely why the US has invested so heavily over the decades in political interference, political capture, and even regional conflict around the globe. However, the disparity between the US and the rest of the world in terms of economic power, industrial strength, and military might be diminishing faster than the US can impose its “international order” upon it.

A reemerging Russia alone has exceeded the US in terms of military industrial production. China is surpassing the United States across a much wider multitude of metrics. As long as the US pursues unsustainable policies based on an unrealistic premise, it will not only find itself surpassed by a growing number of nations, it will find itself isolated and unstable.

The difference between nations the US calls “adversaries” and the US itself, is the difference between a farmer who cultivates his land in a sustainable, purposeful way, and a predator who mindlessly consumes all in its path until there is nothing left to consume, thus jeopardizing its own self-preservation.

At a time between now and then, more rational circles of interest may displace those currently driving US economic and foreign policies, and transform the US into a nation pursuing power proportional to its means and invested in working together with the other nations of the world, rather than attempting to impose itself upon them.

https://journal-neo.su/2024/02/15/fatal-flaws-undermine-americas-defense-industrial-base/