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Comment by NickC25 | Hacker News Reader

I think the deeper question here is - why are military contractors, especially the ones that have no public-facing products, even allowed to be stock-issuing public corporations in the first place?

If a corporation's main goal is to increase revenue, but their only customer is the military, why is it that we would force the rules of stock markets on them? Military R&D isn't something you can sum up in a quarterly report, nor is it something you can tack KPIs onto on a regular basis - some of that R&D is classified.

Plus, thorough lobbying, it basically forces our military to be in wartime 100% of the time, because contractors cannot have a bad quarter, so they need to constantly have new theaters to sell into, which in turn forces the DoD's hand (and don't get me wrong, all the DoD employees probably own Lockheed stock).

Why contractors are allowed to lobby is beyond my comprehension.

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> but their only customer is the military

Not true. Their only customers may be militaries, plural, but that's not the same as the military, singular. Defense contractors routinely sell to allied countries, with complex financing arrangements whereby the costs are distributed between the foreign customer and the US (which agrees to pay partial costs for strategic reasons).

The distinction is important because US financing is done by a civilian, not military, branch of the American government. Production is not a pure function of physical capability; it still requires financing. If the military is capable of producing its own weapons, lacks civilian financing to do so, but can sell excess production to foreign allies, then you've handed the military the keys to self-financing. This undermines civilian control of the military.

> If the military is capable of producing its own weapons, lacks civilian financing to do so, but can sell excess production to foreign allies, then you've handed the military the keys to self-financing. This undermines civilian control of the military.

Interesting point. I would say that handing production to profit-maximizing corporations also undermines civilian control of the military through corporate capture of decision making.

Of course. The author points to a real problem whereby civilian control of the military is undermined because the underlying capabilities have eroded. But this is due to the DoD procurement moat that the Big Five persist; if it were easier to procure DoD contracts, then we'd see more smaller contractors pop up to compete for them. That those smaller contractors are still profit-maximizing civilian corporations wouldn't matter; having a large, diverse industrial base was key to 20th century military victories, as the author concedes. But said industrial base does need to be both large and diverse.

It's how empires fail. When your military suppliers and contractors become large enough to buy the government, they grow like a malignancy, bleed the productivity and resources of the empire into building things that explode, and kill the host.

What is an example of an empire that failed liked this?

Sparta is the closest example i think of. all the men were soldiers and all the hard labor/farming were done by slaves/healots. eventually led to technological stagnation & societal collapse

Did Sparta actually fall because Thebes out innovated them on the battlefield? If so, perhaps an argument _for_ the military industrial complex as a nation’s savior. Perhaps you are thinking of classical Athens, and its loss to the Greek city-state of Syracuse in Sicily?

Arguably, Rome and the Praetorian Guard.

https://en.m.wikipedia.org/wiki/Praetorian_Guard

Rome fell because of the Praetorian Guard?

Not because of unsustainable conquest, a massive influx of slaves taking all the work, flawed institutional structures with only norm-based barriers to generals from seizing control of the government, and massive Germanic migrations due to reasons unknown (probably steppe people)?

The Praetorian Guard appointed Claudius as emperor, and had assassinated several others, all of which could be considered, arguably, a major step in the downfall of the Roman Empire.

Remember, this was a response to illustrate: ”When your military suppliers and contractors become large enough to buy the government, they grow like a malignancy, bleed the productivity and resources of the empire into building things that explode, and kill the host."

Not just Claudius, they were involved in a few imperial transitions.

But it's debatable if that's a military-industrial complex functioning in conditions of economic hazard. Like, advisors and royal courts plotting against the ruler is fairly common and historically never involved stock buyback schemes.

The more general phenomenon of what the parent is describing is rent-seeking becoming an outsized portion of society. When the rent-seeking class becomes too powerful they drain an unsustainable amount of productivity from the rest of society that eventually causes it to become weak/unstable and fall to internal or external forces. The Ottoman Empire is a good example of this.

Most defense contractors also sell to multiple foreign countries, and many have civilian product lines. No one is forcing the rules of the stock market on them; some major defense contractors are privately held.

AFAIK, the biggest of the biggest such as Lockheed, do not have public products.

Actually, they do have a public product - it's called "corruption". They take taxpayer money intended for R&D, and instead use it to lobby the government to funnel more and more taxpayer money into their pockets each year. The public gets screwed and the large contractors get to walk away and buy more politicians.

you voted for the people who enable them

You can say that, but I very much did not.

Lockheed Martin sells many products in the civilian commercial market.

https://www.lockheedmartin.com/en-us/products.html

You might want to actually look at the "products" on that page, and then re-read the paragraph on the top of that page.

Nothing about weapons systems, fighter jets, missiles, etc.. is intended for the civilian commercial market.

You might want to actually look at the products on that page, and then re-read my comment. Lockheed Martin sells a variety of products into the civilian commercial market including train controls, utility aircraft, satellite software, AUVs, and flight simulators. Those bring in less revenue than the military business but they are significant. It's like you guys are so eager to push your political narratives that you don't even do basic fact checking.

It’s definitely a recipe for corruption. The same can be said for health insurance, hospitals or private prisons. From a business point of view they want to increase revenue. But as a society it’s often very undesirable for them to grow their businesses and profits.

It was actually a really successful model during WWII. A tank (or something) would be designed by one group and then 5-6 different manufacturers got a contract to manufacture it. We made tons of tanks at very competitive prices.

As the article points out, modern procurement is a different story.

As far as I can tell, the defence companies we’re talking about were not public back then?

They were - they were just general manufacturers. You even had companies like Chrysler and IBM taking gun manufacturing contracts.

Yes, they were. Back in WWII, pretty much every companies were in the war effort. IBM made rifles and Ford made bombers (B-24s).

Those were "public" as in state-controlled. These are "public" as in publicly traded. Very big difference.

WW2: 1939-1945

IPO years per my research -

Raytheon: 1952

Boeing: 1962

Lockheed Martin: 1994

Northrop Grumman (pre merger): 1939

Hard to find clear sources on this, but doesn’t seem like the major defense contractors we’re talking about were public during WW2.

Ah, I tho OP means back then, the defense manufacturers weren't public. I didn't realize they meant today's defense contractors.

I don't get it. Lockheed and Martin were different companies in WW II.

What does that have to do with issuing stock?

The idea is that the companies most efficient at delivering contracts (missiles, planes, bombs) stay in business and the less efficient go out of business. This does require corruption remain out of the bid process...

I mean, I get it. There's a national security risk in letting major defense contractors go out of business.

So, naturally, as taxpayers, we should be kept in the loop on how much it costs, why we're paying it, and complete transparency with regards to how such entities are spending their (read: our taxpayer) money. That's not the case today.

Stock is about owning a piece of a company and enjoying both the up and downsides of it. I don't think there's anything intrinsic to it that the business must be public facing.

Selling stock on public markets of a company is fine. A company whose business model is inherently linked to the continuation of physical warfare having the ability to sell stock is fine. When that company has the ability to use that capital to purchase the government, then it becomes a problem.

Cuz if you can fool the govt into getting funding, you can fool the market too. Both are dumb in different ways.

> Why contractors are allowed to lobby is beyond my comprehension

As Karl Marx illustrated 150 years ago, a state under capitalism is a capitalist state.

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