Government or Industry?: Paying for Future Military Capabilities

• In Event: Resources, Logistics, and War

Abstract

Who bears the cost of future military capabilities, the public or the private sector? Moreover, how does private technology investment shape future US military capabilities? Military research and development (R&D) is central to state power (Brooks and Wolforth 2008), its future military capabilities (Middleton 2008), and its military effectiveness (Hartley 2012). IR scholars assume that military R&D is a public good (Goolsbee 1988). However, in an original dataset, I find that as US military R&D fiscal spending has declined for over 50 years, the US defense industry has increasingly shifted its corporate profits into future military prototypes. Indeed, by the late 1990s, firms spent more on prototypes than the US military. Early empirical analysis indicates that is countercyclical: when public spending decreases, industry spending increases. While US government and defense industries are already interdependent, their relationship appears to be growing even more coordinated and dense over time. The implications of this are myriad. As industry increasingly shoulders the burden and financial risk of developing future capabilities, their incentive structure shifts towards expectations of recovering their prototype investments with future procurement sales. Private profit-driven incentive structures, rather than public good-based planning, increasingly shapes the future of US weapons systems, profoundly conditioning the size and nature of the stockpile of resources, equipment, and capabilities of US military strategy.

Author

• Kaija E. Schilde, Boston University