There Might Be a Financial Crisis, But the World's Arms Dealers Are Doing Just Fine
Stay up to date with the latest headlines via email.
The CEO of a weapons manufacturer has plenty of chances to rub elbows with deputy secretaries of defense, officials from Homeland Security, retired military personnel, and the best and brightest of the defense establishment almost any week of the year.
One such opportunity occurred at the ComDef 2008 conference, which wrapped up at the National Press Club in Washington on September 3. Sponsored by weapons giants like Boeing, Raytheon, and BAE Systems, the day-long conference was organized around the theme of "Defense Priorities in an Age of Persistent Conflict." It featured presentations from a Navy undersecretary, a deputy director at the Pentagon, several weapons manufacturers, and defense representatives from France, the Netherlands, Canada, and elsewhere. With this high-powered lineup, the conference probably delivered on the promise of its catch line: "Where the international defense cooperation community gets down to business."
Next on the calendar in mid-October will be the Women in Defense National Conference at the Crystal Gateway Marriott near the Pentagon. Sponsored by consulting giant Booz Allen Hamilton, the conference includes a panel on the "National Security Priorities in the Next Administration," moderated by a Lockheed Martin vice-president. Foreign policy advisers from the McCain and Obama campaigns will be on hand and -- in a nod towards inclusiveness -- representatives from Bob Barr's and Ralph Nader's campaigns have been invited. The closing reception is sponsored by Lockheed Martin, and Booz Allen Hamilton is picking up the tab for the "Breaking a Glass Ceiling" dinner featuring retired Air Force Major General Jeanne Holm. And then, who would want to miss flying south for the winter? The Defense Manufacturing Conference at Disney's Coronado Springs Resort in Florida in early December offers military industry executives the chance to soak up the rays and address the question: "Are we ready to provide affordable warfighting capabilities?"
One of the persistent themes of these and many other weapons industry conferences is the looming concern that the military budget -- which increased by two-thirds between 2001 and 2008 -- can't keep spiraling upwards forever. ComDef 2008 frames it like this: "persistent warfare is eroding the capability of our armed forces and hard choices will need to be made ... It is increasingly unlikely that more money will be found for defense." Last year, the Women in Defense conference addressed this issue with a panel titled "Shaking the Money Tree: Funding National Defense," moderated by a vice-president for programs and budget at Lockheed Martin.
Shaking the Money Tree
Lockheed Martin stands head-and-shoulders above its competitors as a professional tree-shaker. Between 2001 and 2008, the company saw its contracts from the Department of Defense jump nearly 130%, from $14 billion to $32 billion. In a stagflation economy, their profit margin is more than healthy. The Bethesda-based company reported a 13% increase in profitability for its second quarter -- from $778 million last year to $882 million this year.
The weapons industry's concern about belt-tightening notwithstanding, the military budget is likely to continue its dramatic growth. The Defense Department's base budget, which does not include funds for nuclear weapons or the $12-billion-a-month "global war on terror," has grown by nearly 70% -- from $316 billion in 2001 to a request for more than $515 billion for 2009's fiscal year (which begins in October). Despite the fact that these figures represent close to what the rest of the world combined devotes to the military, neither Barack Obama nor John McCain has adopted reducing military spending as part of his national security plan. In fact, as both of them talk about modernizing the military for the 21st century and expanding the size of the armed forces, the billions add up.
So the weapons industry's alarm bells are ringing prematurely and the future -- particularly in foreign weapons sales -- looks very bright. Take Lockheed Martin, for example: The company, which is springing for the floral arrangements at the Women in Defense conference next month, has more than $10 billion in proposed or recent weapons deals with foreign nations. The biggest deal could be worth $7 billion (that's a lot of gladiolas and irises for Women in Defense) to Lockheed Martin. The United Arab Emirates is interested in the company's THAAD (Terminal High Altitude Area Defense) system. The mobile truck-mounted system is designed to intercept incoming missiles targeted at sites such as airfields or populations centers.
Another potentially huge sale would be to Iraq, where the combination of regime change, occupation, and oil revenue has created loyal new customer. Even as U.S. fighter planes bomb Iraqi cities, the Maliki government has indicated it would like to order 36 of the company's advanced F-16s. Recent sales of these $100 million planes to countries like Morocco, Pakistan, and Romania have all contributed to a bumper year for the Bethesda-based company. But Lockheed Martin isn't the only company reaping rewards in the age of persistent conflict. War and instability are good for business across the board. Jeanne Farmer of the Defense Security Cooperation Agency, which processes requests for foreign military sales, noted at the ComDef meeting, "in the current environment, everybody needs everything right now. We do expect to continue to have large, large sales."
"Our program," she continued, "is growing by leaps and bounds," describing how her agency is dealing with more than 12,000 open cases (in some instances the weapons have been transferred, but not all options have been exercised or the licenses have not expired) totaling upwards of $270 billion.
U.S. weapons sales to foreign countries in 2008 are on track to be 45% higher than in 2007. This year, the United States will offer about $34 billion in weapons to Iraq, Pakistan, Saudi Arabia and other countries. In 2007 that figure was $23.3 billion, just a small bump from the $21 billion of 2006. So far in 2008, Farmer's agency has processed more than $12.5 billion in possible foreign military sales to Iraq -- not including the F-16 fighter plane request, which has not yet been formalized. On Baghdad's wish-list are systems like the Abrams tanks, attack helicopters, Hellfire missiles, heavy transport aircraft, and other weaponry. Proponents of billion-plus weapons sales argue that these sales will reduce Iraq's reliance on the United States military, but we need only look at Pakistan to see evidence that these policies create well-armed short fuses.
Since the beginning of the war on terror, the United States has transferred billions of dollars in weaponry and more in military aid to Pakistan. Recently, the U.S. military has mounted attacks in Pakistani territory aimed at Taliban and other restive elements without even informing Islamabad in advance. The response from the Pakistani parliament? A forcefully worded statement that the Pakistani military -- armed, trained, and outfitted by the United States -- be prepared to "repel such attacks in the future with full force." It wouldn't be the first time U.S. forces clashed with U.S. armed adversaries.
Bad News for Them: Good News for Us?
A multi-billion-dollar trade, a world bristling with weapons, and a well-organized and powerful industry committed to keeping it that way: these factors make the arms trade big news. Whoever assumes the presidency in January will have to choose between continuing Bush's policy of arming the world or setting a new course against strenuous objections from the military-industrial complex.
But neither of the presidential hopefuls has devoted even a few lines of major addresses to weapons-sales policy. Even so, the industry seems worried about Barack Obama's vice presidential pick Joe Biden. Loren Thompson, a pro-industry analyst with the conservative Lexington Institute, told Defense Daily International that "Biden's record on weapons-related issues is that of a doctrinarian ... he always comes down on the liberal side. So this is not good news for the defense industry."
As CEOs, retired generals, and Pentagon officials flit from one industry-underwritten conference to another, bemoaning imagined cutbacks and belt-tightening, the real bad news for their business would be good news for everyone else -- namely peace, diplomacy, democracy, and human rights.